A Raise Or More Vacation? Which Would You Choose?

When it comes to increases in compensation, almost everyone focuses on how big of a raise they can get. But what if your yearly increase was a bit more negotiable and you could choose benefits, such as more vacation time, over salary? Would you do it?

The Plus Side Of Taking More Benefits

Very few people consider negotiating benefits when it comes time to discuss your annual increase, but it is something you should seriously consider. Why? Some benefits can be more valuable than the tiny or even large raise you might be getting!

What are some benefits you can negotiate? You can negotiate educational opportunities, health benefits, retirement benefits or, my favorite benefit of all, vacation time! Many of these benefits will continue to help you either financially or emotionally for the rest of your tenure with your current employer.

Extra vacation time, my favorite benefit to negotiate instead of a raise, is very important to me because you can find plenty of ways to make more money, but you can’t make more time in a year. An extra week of vacation is almost 2% of a working year, so you could consider it very similar to a 2% raise.

With an extra week of vacation, would you feel less constrained by the choices you have to make in order to make your limited amount of vacation last the whole year? The extra week would give me just enough play room to where I wouldn’t have to feel like I have to save some of my vacation just in case something happens. Instead, the extra week would provide the wiggle room and if nothing happens I can enjoy some time off at the end of the year!

Finally, it is important to note that extra vacation doesn’t cause you to pay more in taxes like a raise would. Since you’d still be earning the same salary, your taxes would remain the same. Luckily, you aren’t taxed on the number of weeks of vacation you get!

Benefit increases aren’t for everyone though. Here are some considerations for the raise side of compensation.

Why Everyone Loves Raises

Everyone loves raises and for good reason. A raise will show up in your paycheck each and every time until you either get another raise or find yourself in a different job. Even if you switch jobs, there is a good chance you’ll take your raise with you.

Raises are awesome because they show up as part of your salary. That means that your raises can compound themselves as you get more raises in the future! If you consistently get big raises, your salary will skyrocket in no time at all! Another benefit of a raise is most employers ask for your most recent salary when you’re interviewing, but they rarely ask how much vacation time you used to get. You’re more likely to take a raise with you than extra vacation.

You should also consider that some of your other benefits, such as your 401(k) matching, are based off of your salary. Whenever you get a raise in your salary you get a raise in your 401(k) matching contribution as well. It’d be a bummer to miss out on that by taking extra vacation.

Either way you go, if your total compensation is increasing you’re doing something right! The real question is, which way would you go? Would you go for some extra benefits, such as vacation time, or would you prefer to get the raise? Let me know in the comments below!

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. Alicia @ Financial Diffraction says:

    It’s funny, I was just talking to my co-worker about this recently. He had a 2-year freeze, but is now up for renewal of his contract, so he’s been thinking about whether he’d like the extra cash, or the extra time. We both have a decent amount of vacation (I have 4 weeks, 12 bankable sick days, and another week of “others” off aside form my stat holidays. He has 3 weeks vacation, 3 sick days, 2 PTO). He’d rather have more money, and so would I. I was surprised he wouldn’t even want to get up to 4 weeks, but money is worth more right now early in a career… it adds a lot to the whole promotion process year over year.

  2. Interesting question, Lance!! I think if it was Rick who had to choose between the two, he’d take the raise, simply because he gets paid for OT and so there’s some extra earning potential there, plus, he has a pretty good chunk of vacation already. However, if we were at debt free, I’d bet he’d take the vacation time.

  3. When we were first married we really needed the extra money but toward the end of our careers, we definitely would have taken the time off. It seems that you actually can have enough money but I don’t think anyone ever has enough time.

  4. Where I work, I’m lucky enough to have a very generous amount of vacation, so it would be the money for me in a heartbeat. But, if I had only 2-3 weeks like many others, I probably would at least consider both in answering the question.

  5. I am so glad to read this, I would rather have the vacation time. Next question: when do you begin this conversation? We are starting the budget process for next year. Should I approach my supervisor with my request now or wait until review time next March?

    • Some companies are more flexible than others. I’d ask your boss if it is even an option ahead of time. In most cases, once it is time to discuss annual reviews it is too late.

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