Comparing Military Compensation to a Civilian Salary

Ed note: Negotiating a compensation package can be tricky. Do you ask for a larger salary, more time off, greater benefits? This is especially true when leaving the military. Many of the things military members are accustomed to aren’t part of traditional compensation models. So it’s important to those perks into account when negotiating your civilian position; otherwise you could risk needing to change your lifestyle.

Transitioning from the military into the civilian sector can be difficult for a variety of reasons. One of those reasons is financial. Military pay is complicated, which makes it difficult for most service members to accurately predict how much they need to earn in the civilian world to keep pace with their military pay and benefits.

Most military members receive base pay, along with a variety of tax-free benefits, including housing allowance, food allowance, medical care, clothing allowance, and sometimes other special pay and benefits.

To better help you understand the total value of your pay and benefits, the military sends each service member a Personal Statement of Military Compensation each year (you can download it from myPay if it isn’t mailed to you). This statement combines your pay and benefits values to more accurately show you the total value of your military pay and compensation.

Let’s take a quick look at military pay and benefits, and how you can equate those to civilian pay.

Base Pay: Your base pay is essentially your salary. This is taxable income (unless you are in a tax-free zone). But you can’t expect to maintain the same standard of living with simply an equivalent base salary in the civilian world. You need to take your other pay and benefits into account.

Basic Allowance for Housing (BAH): The military provides housing or a tax-free housing allowance for all its members and their families. BAH can vary dramatically based on your rank and location. However, on the low end, we can assume BAH is worth around $600 per month. On the high end, BAH can easily reach the $2,500-$3,500 range.

• Value of BAH: Variable, depending on your rank and your location.

Basic Allowance for Subsistence (BAS): BAS is a monthly tax-free food allowance given to all military members. Very few civilian companies offer any form of food allowance to their employees. If you work in the food industry, you may get a free meal after your shift, and some companies offer employees free coffee or snacks. It’s only in rare circumstances that companies regularly offer free meals (Google is a famous example). At the end of the day, most companies provide no type of food benefit.

• Value of BAS: $367.92 for enlisted members; $253.38 for officers.

Health Insurance: TRICARE is one of the most valuable and underrated benefits military members receive. There is no monthly premium for TRICARE Prime if you are on active duty, and any out of pocket expenses are rare and very inexpensive. In terms of overall out of pocket expenses, it’s almost impossible to find a comparable health insurance plan in the civilian sector. But let’s try to put a dollar sign on it. The National Conference of State Legislatures reports the average cost of annual employer-sponsored health insurance premiums was $16,351 in 2013, with workers paying an average of $4,565 of the cost.

• Value of health insurance: $4,565 annually, or about $380/mo. (estimated). Note: this is for premiums only; this does not include any medical visits or prescriptions.

Additional Pay & Benefits: Many military members receive additional pay and benefits, which may include clothing allowance, incentive pay, flight pay, hazardous duty pay, family separation pay, Cost of Living Adjustments (COLA), sea pay and other bonuses and incentives. These rarely exist in the civilian sector. Some companies may offer a one-time relocation bonus if you have to move for work. But they rarely offer any form of ongoing COLA or other bonuses.

• Value of additional benefits: Variable, depending on rank, years in service and career field.

How much do you need to earn in the civilian workforce?

Because military compensation is so varied, there is no hard number for everyone. In general, you should look at your expenses, and figure out how much you need to earn to cover your expenses, instead of looking to match your exact compensation.

If you want a rough rule of thumb, I would take your monthly tax-free benefits and add 25% to account for taxes. Add about $380 a month for health insurance. Then add your base pay. This should give you a very rough approximation of how much you will need to earn each month in the civilian sector to approximate your military pay and compensation and maintain your standard of living.