Comparing A Military Salary VS. Civilian Salary

Editor’s Note: Negotiating a compensation package can be tricky, especially when transitioning out of the military into civilian life. Many of the things military members are used to aren’t part of traditional salary models. Thus, it’s critical to take all perks into account when negotiating your civilian role in the workforce. The following article compares a military salary to a civilian one. Read on!

Transitioning from the military into the civilian sector can be difficult from a financial standpoint. Military salaries are complicated, which makes it difficult for most service members to predict and compare their pay in the civilian world against what they earned in the military.

Most military members receive base pay, plus a variety of tax-free benefits, including housing, food, and clothing allowances, as well as paid healthcare and other special pay and benefits.

To better help you understand the total value of your pay and benefits, the military sends each servicemember a Personal Statement of Military Compensation (PSMC) each year (You can download it from myPay if it isn’t already 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 look at military pay and benefits and how you can equate those to civilian pay:

Base Pay:

Your base pay is your salary. This is taxable income (unless you are in a tax-free combat zone).

You can’t expect to maintain the same standard of living with a base salary in the civilian world. You need to take your other pay and benefits into account.

Basic Allowance for housing (BAH):

The military offers a tax-free housing allowance for all its members and their families. It can fluctuate greatly based on your pay grade and location, and whether you have dependents. On the low end of the spectrum, your Basic Allowance for Housing, or BAH, could be worth around $600 per month, using the E-1 pay grade. On the high side, BAH can reach the $2,500 to $3,500 per month, even without dependents.

Basic Allowance for Subsistence (BAS):

Basic Allowance for Subsistence, or BAS, is a monthly tax-free food allowance given to all military members. The value of BAS is equivalent to around $375 for enlisted members and around $255 for officers.

Very few civilian companies offer any form of food allowance to their employees. It’s only under rare circumstances your company would offer free meals regularly.

Health insurance:

TRICARE is the health insurance provided by the military. It is another valuable benefits military members receive. There are no monthly enrollment fees for TRICARE Prime if you are on active duty, and the deductible is usually $0. However, there are kinds of TRICARE that do require monthly enrollment fees.

While it’s hard to find a comparable health insurance plan in the civilian sector, let’s try to put a dollar amount on it.

According to the Kaiser Family Foundation, in 2019 the average annual dollar amounts contributed by covered workers for 2019 are $1,242 for single coverage and $6,015 for family coverage. The average dollar contribution for family coverage has increased 25% since 2014 and 71% since 2009 The cost of employer-sponsored covered is usually shared between the employer and employee.

Healthcare equivalency is one of the biggest factors you should consider when calculating your civilian salary equivalency.

Additional pay & benefits:

Many military members receive additional pay and benefits, which may include:

• Clothing allowance
• Cost of living adjustments (COLA)
• Family separation pay
• Flight pay
• Hazardous duty pay
• Incentive pay
• Other bonuses and incentives
• Sea pay

The value of additional benefits is variable, dependent on years in service, rank, and career field.

These benefits seldom exist in the civilian world. While some companies could promote a one-time relocation bonus if you move for work, they rarely offer any form of ongoing benefits or bonuses.

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

Because military compensation varies greatly, you can’t compare apples to apples with military vs. civilian pay. As a general rough rule of thumb, you can take your monthly tax-free benefits, add 25% to account for taxes, $500 a month for health insurance, and then add your base pay.

This will give you an 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.

You should also 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.

More help with military taxes

Whether you’re enlisted in the military or now in civilian life, H&R Block can support you when it comes to taxes.

When it comes to taxes, military personnel have many things to consider. H&R Block is here to help with tax filing information that can help military men and women, as well as their families, find the right tax filing options for them.

Need more education? Learn more about military tax.