Calculating PTO in compensation

[gman33]

Looking at a couple hospital employed positions that include PTO.
Hourly pay at rate X.
The total compensation numbers are quoted as based on 2080 hours per year.
40 hrs x 52 weeks.

You are not working this many hours.
Working closer to 1700 with the extra 380 hours being paid under time off.

Here's the part I never thought about.
They are quoting an hourly rate of X, but the effective hourly rate is higher because you are not really working all the hours for which you are getting paid.

This is different than being an IC where you just get paid when you work.

Here's my comparison math.
Let's pretend you have two positions.
For simplistic comparison, both have equal benefits and in both situations the employers covers their part of your taxes. (not true IC)

Position A is with group paying $160 hr for 1700 hours/year. 160 *1700 = $272000
Position B is with group paying $130/hr. You work 1700 hours/year, but also get PTO for another 380 hours.
(130 x 1700) + (130 x 380) = $270400

So if my thinking is correct, these 2 jobs effectively pay the same.

Things are never this simple, but am I off in my logic.

In prior careers I was always a salaried employee.
So thinking about these details was never on my radar.

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[SoCuteMD]

I think you are making this unnecessarily complicated. Figure out the salary and then divide by clinical hours.

 

[gman33]

There is no salary.
Straight hourly rate, but get paid PTO time when not working.

 

[two guys]

I think she means total yearly income (same thing essentially as salary)

At job A you make 272,000 for working 1700 hours - that's 160/hr

At job B you make 270,400 for working 1700 hours - that's 159/hr

So yes, if you really are only going to work 1700 hours at Job B then it is roughly the same hourly. The devil is in the details - it would be interesting to know how many people at Job B work more than 1700 and have some of their time off unused at the end of each year. That would effectively lower your hourly rate.

You might want to also add up the other forms of compensation for each job into that figure. I would use the value that they are worth to you. If there's free health insurance for you and your family, what is that worth to you (it's gonna depend on the size of your family). If there's 401k money or signing bonuses add it to the figure.

You also need to figure out what your going to do with any vesting process. Some places contribute 50k to your 401k but you are only vested in that 20% each year, meaning if you leave before year 5 you don't get all of it. Some places only pay malpractice tail 20% each year so if you leave before 5 years you're on the hook for the remaining percentage. Most SDGs and some employee models have a partner benefit, you can decide whether you want to count that as money in the bank or not. You need to decide if you're going to assume you'll stay 5 years and get all of those benefits or if you'll assume you'll stay 2 years (average for BC EM in first job). Obviously, the numbers can be a lot different depending on how you do this. It's up to you and how likely you feel you'll be at that job long term. If you assume short term, it will almost always favor an employee or cmg model. If you assume long term, it will almost always favor a true SDG model (but then you take the risk of being wrong and not staying). How likely you are to stay is dependent both on you and the job.

 

[Arcan57]

Agree with two guys about finding percentage of actually used PTO. If you're shop is short staffed and you're employed, it may be like frequent flyer miles were you can't actually redeem them for the days you want.

 

[gman33]

If you use the PTO, you get paid.
If you don't use it, you can cash it in at the end of the year.

In my mind it would be simpler if they just paid a higher hourly rate or salary with a minimum number of hours.
That's why I asked about this topic.

Thanks for the additional comments.

 

[suckstobeme]

I'm hospital employed and have a similar set up. 4 Wks PTO (after 5 yrs it;s 5 wks and after 10yrs its 6wks). Full time is 16 (10hr) shifts per month. Honestly, vacation doesn't really make sense at our group, because if you just want to be off for a week, then you just get the scheduler to make your other weeks a little busier and get a week off. You still work your ful number of shifts that month. You might actually use your vacation days for vacation, but really people only do it if they are going on a big multi-week trip (rare).

So, in reality, people use this 2 different ways:
1) Group A- people take a shift reduction of 2 days per month. Instead of working 16 shifts/month, they work 14 and take 1-2 vacation days per month. This allows them to keep full time benefits and work a more tolerable schedule. These are usually the mid to late career folks, but I've noticed the fresh out of residency crowd does this too, for some reason.

2) Group B- Still actually work 16 shifts/month and cash it all in. It ends up being like 30K for the year, which is not bad.

Everyone still takes short (5-7 days) trips to Hawaii or Florida or the Caribbean without really using vacation days.

So the summary is, if you have a friendly scheduler that will move shifts so you can take vacation without using PTO days, then this is a really great benefit.