It is common for employees to be unaware of the dollar value of their benefit package, especially when they are feeling the effects of the healthcare crisis. A total compensation statement can help them see the true value of their salary and benefits combined. It can show them the ‘hidden’ benefits that their employer also pays for. It can also help employees gain a better appreciation for what their compensation package really offers. Employers also ‘win’ when providing these statements because it raises morale, increases loyalty, and aids with employee attraction and retention.
Total Compensation (Benefit) Statements
Total compensation statements communicate the entire value of an employee’s compensation package. This includes wages and the hidden cost of the benefits that employers provide.
Although total compensation statements are not legally required, they demonstrate to employees the monetary value the employer is providing beyond the standard paycheck. Knowing the full value of their compensation packages can help increase employee morale and loyalty, and these statements can serve as a basic but useful retention tool. It can help employers promote the full value of their organization and its offerings.
A total compensation statement includes the cost of all monetary forms of compensation on the part of the employer. This includes direct and indirect compensation totals. These totals must be compiled in order to offer a total compensation statement to employees. Direct compensation is compensation paid directly to an employee, such as the employee’s salary. Indirect compensation includes any forms of compensation that are not paid directly to an employee, such as employer-paid insurance premiums, retirement benefits, and paid time off.
A total compensation statement may include the following:
- Salary/hourly wages
- Retirement plan
- 401(k) matching contributions
- Educational or employee assistance programs
- Paid time off – vacation time, sick leave, holidays, jury duty, etc.
- Insurance – health, dental, vision, disability, life, etc.
- Wellness rewards – discounts, cash bonuses, etc.
Benefits of Total Compensation Statements
Outlining the total cost of all these benefits can be eye-opening for your employees. Total compensation statements can also:
- Increase employee awareness of their benefits and how much those benefits cost the company
- Provide a dollar amount for benefits that do not seem to have a tangible monetary value, such as an Employee Assistance Program, pension program, paid leave, student loan help, tuition reimbursement, flexible spending accounts, retirement plan contributions, employer HSA/HRA contributions, etc.
- Promote the idea of total compensation, beyond just a paycheck
- Raise employee morale because they tangibly see the array of benefits being offered by their employer
- Higher retention rates by employees
- Show potential recruits their total calculated compensation on top of their base compensation to make your organization more competitive in the hiring process
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.