The million dollar question during the transition is, what about compensation? How much am I worth, what should I expect, should I negotiate, how do I negotiate?
If you work with a headhunter, they will always throw the highest number possible at you. If you ask, they will tell you it’s “total comp.” Total comp stands for total compensation, and it typically includes base salary, signing bonus (optional), and/or performance bonus (optional). This of course assumes you get the full performance bonus which isn’t always the case, especially your first year in the job. If you research jobs online, they will also typically refer to the “total comp” number as well. Keep this in mind while navigating compensation.
When researching pay online, there are a variety of resources. If you’re looking into the tech or financial services industry, check out paysa.com. I have found this to be the most accurate of any resource out there. LinkedIn has started to attempt to crowd source salary data, but I haven’t seen a lot there yet. Glassdoor.com is another great resource for any industry. Glassdoor is also a great resource for researching companies in general. It’s crowd sourced information, meaning user submitted, so keep that in mind. But, users will often post about interview experiences, employee experiences, benefits, culture, compensation, etc. Given that it tries to do everything, I’ve found the information to vary widely, but it’s better than nothing. Lastly, when it comes to pay – ask. As you begin to network and make connections, ask people who work there about pay expectations. If you are potentially coming it at the same level or higher than them, do not ask. However, if you know someone on the inside who is above the level you would come in at, they very well may know the general pay range. It may feel to be a bit of an awkward question, especially considering you never had to worry about it on active duty. But, it’s a totally normal question and conversation topic in the private industry.
As you are researching total comp, there are a variety of benefits that you’ll need to consider now that you’re leaving active duty. The biggest one, Tricare. Many of my friends actually stayed in the reserves, just to get the reserve’s version of Tricare, which is a great deal. The bottom line is, nothing in the private industry compares to Tricare. You’ll actually have to get your wallet out when you go to the doctor or dentist! Most policies cover the basics, but for uncommon visits you’ll likely have a small co-pay at a minimum. I could write a whole post about my perspectives on this, now having had a less-than-great policy and currently a really good one. But, the bottom line is, read all the documentation provided about a healthcare policy – the most important thing to look for is the deductible. That determines how much you will have to pay out of pocket. Basically, the lower the better. However, balance that with how much you have to pay monthly. A super low deductible may not be worth it if the monthly premium is high. It’s a judgement call based on you and your family’s needs. The main point here is, policies vary widely and Tricare is gone.
As you continue to investigate benefits, the next one to pay attention to is the 401k. This is similar to the TSP (Thrift Savings Plan). The main benefit with the 401K in the private industry is many employers do some sort of matching program. The most common is 5%. You’ve probably heard that, “my company matches 401k at 5%.” And if you are like me, you were like, “wtf does that mean?” but, too scared to ask. Welp, now I know. What that means is, when you contribute to your 401k, you typically contribute as a percentage of your pay. So if you make $100k, and you contribute 5%, you contribute $5,000 per year. And this is taken from each paycheck throughout the year to a total of $5,000. If your employer matches up to 5%, then they will also give you $5,000 per year into your 401k account. It’s a sweet deal. Now, if you choose to do 6%, your employer maxes out at 5%, so you won’t get any additional funding from them. Conversely, if you don’t put anything in your 401k, neither will your employer (in this particular scenario). Some companies actually give you few free percentage points just for being an employee, which is fantastic. 401k’s are great because you’re saving for retirement. And they are also great because it reduces your taxable income for the year. What that means is, because you never got paid that $5,000 that you put into your 401k, your taxable income becomes $95k, not $100k. There are limits on how much you can contribute to your 401k. The max you can contribute for 2020 is $19,500, and the max you can contribute combined with your employer is $57k. Bottom line with 401k is look for a matching program, 5% is pretty standard and considered good.
The next aspect of the benefits package you need to look out for is PTO – paid time off – in other words, leave. If you were like me, you literally never worried about leave on active duty. Even though we had to take it for weekend days, 30 days was plenty. And I know most of us rolled over a lot of days each year, especially the years we were in a operational unit. Well, in the private industry, PTO varies widely. The bare minimum you should be willing to consider is 2 weeks. And let me tell you, 2 weeks blows. I had 2 weeks for my first 18 months out. 2 weeks is 10 days…for the entire year! And most employers do not take all the federal holidays (outside of the defense industry and financial services industry). So, you might get half of the federal holidays, and 10 days off. It’s rough, especially when you’re used to more days than you need. The good news is, lots of employers are realizing that if they hire the right people, they can give you lots of time off and you’ll still get the job done. This is most common in tech, where many companies have unlimited PTO. My recommendation is to look for 3-4 weeks. Also pay attention to other random days off that might be available such as “floating holidays” or “family days”. Some companies have these as free extra days off that could bump 2 weeks of PTO up to basically 3-4 weeks. Additionally, talk to vets on the inside. Some companies have PTO on paper, but don’t really follow it. And individual managers determine if they really feel like tracking PTO. Sometimes, it’s “big boy” rules and you just put your time off on the team calendar, so your team knows when you’re out, and that’s it. Bottom line here is, don’t let an employer get away with giving you less than 2 weeks (10 days), you’ll regret it.
Another consideration is BAH. No more housing allowance. For the first time in your career, your base salary will have to cover your housing expenses. It may not seem like a big adjustment, because you likely included your BAH in your total pay, when figuring out your budget on active duty. But, one big factor I didn’t truly realize, was the impact of BAH being non-taxable. That was a huge benefit that I didn’t fully understand. It significantly reduced my taxable income on active duty. As you’re looking at your offer, really consider what your rent/mortgage will be, after taxes.
For most of us, you likely don’t have a wardrobe that transitions well outside of the uniform. No more uniform stipends. You’ll need dress shirts/blouses, slacks/pants, suits, new shoes, etc. Much of corporate America is business casual, some industries still wear suits. The bottom line is, this will be a significant expense once you get out. And something you will have to maintain over time. Dress shirts aren’t cheap. If you’re planning for your transition early, watch out for sales and start picking up the basics – dress shirts, slacks, etc. early, to spread the cost out over time. Fortunately, many industries are starting to relax the dress code. In both companies I’ve worked for, a collared shirt and jeans/chinos is fine.
The last piece here is negotiation. Something you likely never even thought about on active duty, because it wasn’t an option. How great would it be to tell your CO you want a raise or you’re leaving for another unit?!
Well, while you couldn’t do that on active duty, you do get to negotiate in corporate America. In fact, it is expected. The difficult part is, if you are using a headhunter, the company you are interviewing with likely has a set price they pay for vets (typically, because the bring vets into the same type of role), and you generally don’t have negotiation room. However, if you are interviewing for a role on our own, you generally have something to work with. Regardless, it’s always worth a shot. Here’s why – think about all the time and effort a company goes through to finally find you. After all the calls, interviews, paperwork, discussions, weeks and weeks have gone by, and they finally like you and want you for the job. Let’s say you ask for $15k more than they offered. Do you really think they will be so offended as to cut you off and start the process all over again? No way! That’s a lot of work and they need to fill that role now! Plus, why would they be mad at someone trying to make a little extra bank? Especially, if you think you’re worth it?
I’m no negotiation expert by any means, there’s plenty of resources out there, and the options vary largely based on what your offer is.
First, watch this. This video has some great tips as to how to approach negotiation. Best video I’ve seen out there. Ramit has some great content overall, so I highly recommend his other stuff. Ramit covers the “how” in the video, below are some things I’ve seen/done in my negotiations.
- Focus on your pay, this is your shot to bump it up a bit. Here’s a few things to think about.
- Ask for 10% above what they offered you in salary. It’s minuscule to them and most roles have a wide pay band.
- Ask for a signing bonus, if they didn’t offer one initially (think 10-20% of your base, even more in some cases; talk to someone on the inside for more specifics here). This can help cover the cost of moving (they don’t know that most, if not all, of your final move is covered by the military, and it isn’t their business anyway).
- Ask for a performance bonus option if they didn’t offer one initially. 20% is a good rule of thumb here. And if they don’t have a standard performance bonus program, most companies do, then work to clarify how the bonus will be determined each year.
- Think about things that don’t effectively cost the company anything.
- PTO. The “cost” of PTO is not something that’s really accounted for anywhere. Most of the time, you still have a job to do, and your PTO isn’t going to impact how much work you get done. That’s an easy win.
- Company car. This isn’t an option in most companies, but if you’re in a sales role, or a construction role with multiple job sites, it may be an option. You’ll have to feel out the role to see if it’s something they are willing to flex on.
- Gas card. If you can’t get a company car, maybe you can get them to cover your gas if you’re driving a lot.
- Get creative for your specific situation, what is something that would help you out, and not cost them much, if anything?
The key that Ramit stresses in his video and his other content is, if you’re asking for something better than the initial offer, you need to find a way to justify it. Why are you worth more than the initial offer? What is it about you, that makes you a stand out? Saying you are “better” than everyone else isn’t going to cut it. This is a great time to pull out a quick version of one of your success stories that shows how you always deliver and go above and beyond.
Do not try to negotiate benefits like medical, 401k, etc., these generally aren’t flexible as they are managed by 3rd parties with pre-set pricing that the company negotiated for all employees. Plus, you’ll look stupid if you try.
I am no expert on negotiation. But, I recommend Ramit’s video to start with. And most importantly, find vets who already work at the company you are interviewing with and get their take. As long as they are at a higher level than where you are coming in at, they will know what your level typically gets paid, and if the company is open to signing bonuses and/or performance bonuses.
There’s a lot to consider when dealing with “total comp” on the outside. Do not gloss over this aspect of your transition or you will seriously regret it!
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