Is the Job Offer Worth the Commute?
A job further away has to pay more to leave you better off, and most people work out how much more by guessing. This calculator does it properly. It takes what you earn now and what you are being offered, how far each job is and how long each trip takes, and returns what the offer is actually worth once the extra travel is paid for out of after-tax income. Two things make the answer worse than it first looks. A pay rise is taxed at your marginal rate, so only two thirds or so of it reaches your bank account, while the extra petrol and wear comes out of what is left and cannot be claimed, because travel between home and work is private travel. And the extra hours are unpaid, so a rise that looks respectable in a year can be poor once spread across the additional time in the car. The calculator gives you the net annual gain, the break-even salary the offer would need to match your current position, and what the new job pays for each extra hour it costs you. Every figure assumes both jobs are otherwise the same; it cannot price a better manager or a shorter leash.
Marginal tax only; this does not model ACC levies, KiwiSaver or student loan, which reduce the take-home rise further. Travel between home and work is private and not deductible. An estimate to inform a decision, not advice on one.
How it works
The pay rise is the offered salary less your current salary. It is reduced by your marginal tax rate to give the increase you actually receive. Travel cost for each job is its one-way distance times two, times days a week, times weeks a year, costed at the Inland Revenue kilometre rate for your vehicle, tier one up to 14,000 kilometres and tier two above it, plus parking and tolls per day worked. The extra travel cost is the new job's cost less the current one's. The net gain is the after-tax rise less that extra cost. Extra hours are the difference in one-way travel time, times two, times days worked. The per-hour figure divides the net gain by those extra hours, which is what the new job pays you for the time it takes. The break-even salary is the salary at which the after-tax rise exactly covers the extra travel: your current salary plus the extra cost divided by one minus your tax rate.
Worked example
You earn $85,000 and are offered $95,000, a $10,000 rise, taxed at 33 percent, so about $6,700 reaches you. Your current commute is 8 kilometres each way, 3,680 kilometres a year, costing about $4,416 at the tier one petrol rate. The new one is 34 kilometres each way, 15,640 kilometres a year: the first 14,000 at $1.20 is $16,800 and the remaining 1,640 at $0.37 is about $607, so about $17,407. The extra travel is roughly $12,991, which is nearly twice the after-tax rise, leaving you about $6,291 worse off a year. The trip also grows from 15 to 45 minutes each way, adding about 230 hours a year. To break even you would need about $104,389, not $95,000.
Why the answer is so often no
Three effects compound. The rise is taxed and the travel is not deductible, so roughly a third of the rise disappears before the first tank of petrol. Distance is doubled by the return trip and multiplied by the number of days, so a change that sounds small becomes thousands of kilometres. And crossing the 14,000 kilometre threshold means the extra distance costs less per kilometre than the first part, which flatters long commutes slightly but never enough to rescue them. If the answer here is negative, the number worth quoting in a negotiation is the break-even salary, because it is the offer that would leave you no worse off.
Related calculators
- Commute cost calculator: what your current trip costs in full.
- Driving vs bus vs cycling: whether another mode changes the answer.
- Long commute vs a closer house: moving instead of turning the job down.
- PAYE calculator: the exact take-home on both salaries.
- What people earn where you live: whether the offer is competitive at all.
- What your commute really costs: the background to this calculation.