FOOL'S SCHOOL DAILY Q&A

Total Compensation

Q: I've just started job hunting, and the recruiters keep talking about "total compensation." What does that mean? -- P.F., via the Internet

A: In addition to the base salary, which is the fixed amount you'll be paid according to your job classification and the needs of the job market, there are several other elements to your "total compensation" package. These include incentives (additional pay based on performance, commonly known as "the Big Bad Bonus -- woo hoo!") and protectives (programs of insurance, such as medical insurance, life insurance, disability insurance and so on).

Then there is the all-important capital accumulation. Usually these are stock option plans, which, if the company does well, can dwarf the salary that you earn. If, for instance, you get in on the ground floor of TheNextHotInternetThing.com, and the company records monster sales and goes public, your pile of stock options could suddenly make you an overnight millionaire. That's why, if you're looking at a company, you need to think about whether you'll enjoy working there and find fulfillment in your work, to look closely at the salary, and also to try to evaluate the company's prospects. But remember, just because a company offers stock options doesn't mean that you're guaranteed they'll reap you Midas-sized returns.

Stock options generally "vest" over a certain period, such as five years. What that means is that if you are granted, say, 10,000 options when you join the company, it will take five years for all of your options to be redeemable for shares at their full value. If you decide to quit after your first year, and if the options are vesting (attaining their full value) at the rate of 20 percent per year, then you will only have 20 percent of the value of those 10,000 options. This is one way that a company has of trying to give you an incentive to stay on for a reasonable length of time.

Many companies have retirement income plans, which defer income for services rendered to a later payment date (qualified plans such as pensions, profit sharing, and/or 401(k)/403(b) plans). In addition, especially if you're going to be there for any length of time, you'll want the health insurance package to be a strong one. Nothing like a little catastrophic health problem to derail your plans.

You'll also want to consider perquisites. That's not the same as prerequisites, which are courses you have to take in college to get into the more advanced ones. No, these are things like free use of a company car (or jet, if you're lucky!), expense allowances for that trip to research the beaches of Bali, club memberships and so on.

Finally, you'll want to know about paid time off -- vacations, national and religious holidays, family leave, etc. And if you have children, or think you might during the term of your employment, find out if child care is provided.

Since all of these things affect the amount of time you work in relation to the amount you're paid, they're valid pieces of the total compensation picture.

WHAT NOW? Did you know that there are great resources online to aid you in your job hunt? You can list your resume online, and, more important, you can get a great sense of what's available. Check out http://www.monster.com as one site that lists a great many job opportunities. And for job-hunting tips, turn to http://www.asktheheadhunter.com.

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