Tuesday, December 9, 2014

Evaluating a Developer Job Offer Part 4: Benefits

Few decisions can have a larger impact on your financial life as a software developer than accepting (or not accepting) a new job. Today we'll examine the basic benefits a developer job offer usually includes. This is part four of an essay on the financial considerations when evaluating a software developer job offer. You can start by learning the risks of taking a new job in part one. Updated 10 December 2014 with more on "unlimited vacation" policies.

A new job is about more than salary and title: there are a variety of expected benefits, like retirement, insurance, and vacation, that can dramatically affect your assessment of an offer.

Retirement Accounts

One often-overlooked benefit is the 401k or SEP IRA, especially if the employer contributes towards those retirement funds. Don't let recruiters give you a sob story about being too small for the 401k either. The SEP IRA is like a 401k for small businesses. Even my 1-person company had one when I was consulting. These are useful tools to help you save for retirement and defer paying income taxes.
Another view of the Pacific Ocean near #Kenting #Taiwan
I don’t consider the 401k part of compensation unless the employer offers matching contributions. A typical matching contribution might be 50% of the first 4%. If the matching contributions have  a vesting period of more than a few months, I consider it a gimmick to keep you from leaving, and I don’t consider it part of compensation.

Employee Stock Purchase Plan

An employee stock purchase plan (ESPP) is a way for employees to deduct a fixed amount from their paycheck each month and invest it in their company stock. Typically the employee gets a significant discount on the market price of the stock. One of my former employers offered a 20% discount on the closing price of their stock on the first or last day of the quarter (whichever was lower).

In my experience, only a limited percentage of your salary can be invested in the ESPP.


Vacation. Two weeks of vacation (i.e. 10 days) is the bare minimum amount most companies offer software developers. I think it’s a miserly amount. I would try negotiating for 20 days of paid vacation, since 10 days is less than 3% of a year. Who wants to spend 97% of their life working 40+ hours a week?

The baseline value for a vacation day is the salary divided by 260 (52 weeks * 5 days). I value vacation days at least twice as much as their salary value. You can make more money, but you can’t make more time.

Some companies offer "unlimited" vacation. The word unlimited means "no limits” to humans, but "zero" to many employers. Even in companies with good intentions, unlimited vacation policies can create peer pressure to take less vacation, as this essay written from the perspective of a founder describes.  If you want to read even more on the subject, this essay thoroughly evaluates the pros and cons of unlimited policies.

If your employer uses the word unlimited, make sure to get it in writing. Keep in mind that you might have to really stand up for yourself to take a reasonable amount of vacation. I would ask the manager and recruiter how many days of vacation the typical developer takes per year. If the number seems good, save it somewhere safe for later negotiations when you want a two-week vacation.


US companies typically offer 10 or 11 holidays per year. Unless your offer doesn’t meet this expectation, it’s probably not a point of comparison. I think some employers offer “floating holidays”, which are nice since you’re not forced to travel or go to the beach when it’s crowded. If they offer 0 holidays, then they’re being sneaky and expect you to use your vacation days.

Sick Days

Some jobs dictate how many days you’re allowed to be sick. Others will let you take as many sick days as you need provided that it doesn’t meet the definition of short term disability. Typically they offer insurance for that case. Other companies lump their sick days in with vacation, which seems like a bad idea since it encourages the sick to infect their coworkers. Except in the unlimited case, you’ll need to make some estimates and see if you’re going to lose vacation days (or pay) when you’re sick.


Medical insurance, dental insurance, life insurance, accidental death and dismemberment, short term disability, and long term disability are all common benefits offered by companies of all sizes. Some companies will cover the monthly cost of all these types of insurances. Others will require employees to contribute some fraction of the cost out of their paycheck. In some cases, depending on your age and health, it’s cheaper to get your own coverage.
Macaques having family time at Shoushan Nature Park. #Taiwan #Kaohsiung
Recruiters may make it sound like the question of health insurance can be answered with a “yes” or “no,” but that’s an oversimplification. Every company that offers insurance should have a few sheets of paper documenting their costs and coverage. Ask for it, especially if you need coverage for more than yourself. Because each company has to negotiate their own health insurance, the plans are almost unique.

Before you finish evaluating your company’s offer, make sure to consider other benefits they may offer, which is the topic of my the next essay.

I've created a job offer calculator that will help you compare your current salary, cost of living, and benefits to a job offer. It also helps you compare other aspects of a job offer that we'll go over in future posts. Fill out your email below, and I'll send you a link to the calculator spreadsheet. Don't worry, I won't sell or share your email.

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