I find that it is too often the case that decision makers of large organizations use the company's expense of providing medical benefits and payroll as a bargaining chip during a negotiation.

It goes something like this:

You should agree to a lower than asking salary because we are providing payroll and medical benefits.

We can come closer to your asking price by hiring you as a contractor but you'll have to pay medical benefits and payroll (taxes) on your own.

Is this fair? how much more expensive is it really for a company with 100+ employees to provide the expected?

What is a good rebuttal for this during a negotiation?

  • There is no justification for taking this approach. Even if I asked for a very high salary, which I didn't, being a permanent employee of the company should encapsulate these expenses and should not be a justification to cut the asking salary in half. Jan 23, 2014 at 3:47
  • If the salary you asked for is around what they pay contractors with your skills, then I would say it's justified. The negotiator says to themselves "there is a huge gap here, and they are asking for contractor-level wages; maybe we can come to an agreement with them as a contractor". A comprehensive benefits package is expensive for the company and probably contains things you don't care about, so contracting may be the best choice for you (and that may be how the company saw it).
    – Matt
    Jan 23, 2014 at 4:53
  • @FreshyFresh, it can cost the company a lot of money to provide benefits. In doing job estimating we usually consider double or triple the employee salary rate to allow for enough to cover benefits and overhead. This stuff costs MUCH more than you think.
    – HLGEM
    Jan 23, 2014 at 20:13
  • Its true that if you want healthcare you should consider the value of that as part of your compensation, but payroll services? no, that's just silly as its something you could easily handle yourself if you're so inclined.
    – Andy
    Jan 24, 2014 at 0:29

3 Answers 3


The company offers these benefits because it exchanges some of their costs for other costs. In some ways they're spending more to make you happier, but most usually they're just trying to save money or at the very least make you happier while breaking even.

You should, then attempt to do the same calculations yourself.

  1. Take into account sick days, vacation days, extra vacation pay and compare it with your early salary. For example, because of some yearly benefits, my usual monthly pay is my yearly pay/13,3.

  2. Benefits such as in-company lunch usually result in more worked hours, including spontaneous meetings at the lunch table. Still, I don't think that's bad, because I tend to make poor decisions about what I'll have for my own lunch and I'm happy to delegate that.

  3. Health benefits should be compared to having your own health insurance for yourself. Keep in mind that insurance is a business that buys risk to sell, well, insurance. :) So even if you (for example) wouldn't buy your own dental insurance, you should still compare with buying dental yourself, and then, with final numbers in hand, decide whether you care about having dental.

  4. Research how taxes apply to all of the above. In most cases, it works differently whether the company is paying or you're paying.

This means doing homework, which in turn means you shouldn't be pressured to take the offer on the spot. Study the details of the individual proposal (not a vague we could give you health benefits) and make an informed decision.


Is this fair?

Fairness is in the eye of the beholder, so we really cannot address that part.

how much more expensive is it really for a company with 100+ employees to provide the expected?

It's much more expensive. And of course your "expected" may not be the company's "expected" salary structure. But here's a concrete example.

Where I work, my salary and bonus account for less than 75% of my total "compensation". The other 25% or so is made up of:

  • Health and Welfare benefits
  • Retirement Benefits
  • Long term incentives
  • Other HR programs

Not included in that 25% are other benefits that accrue to a permanent employee (and not contractors):

  • paid vacations
  • paid sick time
  • paid holidays
  • paid personal days
  • paid training
  • company celebrations
  • awards
  • better office conditions
  • better job security, and severance pay in the event of a severance

Being a contractor is different than being an employee in many ways.

(Note: The 75%/25% split is for me specifically. Lower ranking / lower paid workers end up getting an even higher non-salary contribution percentage.)


This very much depends on where you are. Here in Germany, there's a lot of extra cost associated with contracting/freelancing, even beyond simple health care. When employed, insurance against unemployment and some sort of penion insurance are covered too, both of which can be argued about but they make accepting a lower but steady income not unreasonable.

Also, again in Germany, there's the common conception that being employed instead of contracting binds you to a company for a longer term, which ideally would be in their best interest.

A 'rebuttal' simply could be, that you prefer contracting and doing your insurances and taxes.

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