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The Value of Total Compensation Statements

In this day and age of the “Great Resignation”, many employers are finding it difficult to both retain and hire quality employees. More and more often, these employers breathe a sigh of relief when they find a great new hire, only to be “ghosted” on the new hire’s first day of employment. Because of this, employers are considering ways to improve employee engagement and retention, and build a brand that makes the organization an “employer of choice”. One of these ways is adding additional and/or creative benefits and perquisites (perks) beyond typical insurance benefits. Employers who, in the past, only provided traditional benefits are now looking at options such as flexible work arrangements, remote work options, unlimited paid time off, onsite childcare, meals or snacks provided onsite and/or delivered to employees’ homes, gym memberships, and even pet insurance and pet care.

Employers of choice are also proactively communicating this information in a clear positive manner that  provides the tools, information, and knowledge that employees need, and demonstrates that the organization values their employees. One of the communication tools that many employers of choice use to convey this information is an annual total compensation statement. A total compensation statement provides employees with information on what they receive from their employer, including direct compensation such as employee’s base wages, overtime pay, incentive pay, and bonuses. Total compensation statements also include indirect or hidden compensation for which employers contribute toward or pay outright such as retirement savings plans, social security, health insurance benefits, health savings accounts (HSAs), flexible spending accounts (FSAs), disability insurance, life insurance, stock options, mobile devices, paid time off, employee assistance programs, professional development, and other perks such as onsite child care, gym memberships, parking reimbursements, use of a company-owned vehicle, relocation expenses, and educational assistance. These hidden expenses borne by the organization often add up to amounts that employees don’t fully comprehend. Too often, employees don’t realize that, without the indirect compensation from their employers, they would themselves be paying some or all of these related expenses out-of-pocket.

The goal of a total compensation statement is not to show employees how much they are costing the employer. Employers should be careful to present these statements in a manner that doesn’t backfire and make the employees feel the employer is cheap. Instead, done well, total compensation statements can demonstrate an employer’s appreciation for the work completed by each employee, build loyalty, help employee engagement and retention, motivate employees, improve the organizational culture, provide for greater teamwork and better relationships between employees, and between employees and their managers. Ultimately, total compensation statements may be a major contribution to building a better culture and becoming an “employer of choice”, which in turn raises the interest of higher quality candidates. So, with all of these benefits, how does an employer build and present a total compensation statement to their employees?

Building a Total Compensation Statement

Employers may not consider themselves “sales people” but there is always a bit of sales in both hiring and retaining good employees. The total compensation statement should be considered a significant marketing tool, both internally for current employees and externally, for future employees. Once employers determine all of the information that they would like to portray on the total compensation statement, they should ensure that the total compensation statement template is individualized for each employee and that it captivates the employee’s attention. Using color as well as graphs and tables will provide for a better presentation and make the statement easier to understand. Dividing the direct and indirect compensation categories into the following categories will also make it easier to read:

  • Direct Compensation – The hourly or salary wages and other pay, e.g., overtime, incentives, commissions, bonuses, and shift differentials.
  • Health Care Benefits – Employer contributions to any health-related benefit such as medical, dental, and vision insurance, short-or long-term disability insurance, life and accidental death & dismemberment (AD&D) insurance, and employee assistance programs.
  • Paid Leave Benefits – Paid time off, such as vacation, sick leave benefits, personal days, holidays, paid personal or family leave, bereavement leave, paid jury duty leave, or military leave.
  • Federal and State Mandated Benefits – Social Security, Medicare, federal and state unemployment insurance, and workers’ compensation insurance.
  • Other Benefits and/or Perks – Employer contributions to health savings accounts (HSAs), flexible spending accounts (FSAs), and retirement accounts, as well as any other perk or benefit, however creative, that the employer pays in full or contributes towards.

Once the template is built, employers simply need to “plug in” the numbers and prepare to show how they plan to present the total compensation statement to each of their employees.

Communicating Total Compensation Statements to Employees

Employers should remember that, as with all employee communications, interpersonal relationships play a big role in how the communication is perceived. This is true also for total compensation statements. If the supervisor or the employer has built a solid trusting relationship with their employees, then the employees will view the statement (and therefore the organization) in a positive manner.

Often a total compensation statement is presented to an employee at the end of their annual evaluation or at the end of a fiscal or calendar year. While it provides the current information for both direct and indirect compensation, it may also reflect any expected increases in direct compensation. Whenever the total compensation statement is presented, whether at an annual evaluation or at a year-end meeting, and whether by a direct supervisor or a leader of the organization, it is a good idea for the meeting to be individualized and in-person. This individualized time is, in itself, a benefit to the employee and provides an opportunity to ask questions they may have. Otherwise, the employee may not recognize the full value the organization is providing, or worse, they may misconstrue either the benefits provided or the organization’s intentions.

Creating and communicating total compensation through an easy-to-use tool helps an organization to define the value of their employees to each employee. In today’s climate where almost all employers are losing good employees and searching for quality replacements, what is more important than demonstrating the organization’s investment in their employees? It could be the reason some employees choose to stay, foregoing the cost and time of finding and training new employees.

For additional information on total compensation statements, please contact us at www.newfocushr.com.

Written by: Kathi Walker, SHRM-SCP, PHR

                     Sr. HR Consultant





New Focus HR is a human resources consulting and training company that services all organizations. Our expert team collaborates with businesses to attract, motivate, retrain and retain their biggest assets, employees. While engaged with an organization, our focus is to find solutions that improve the company’s internal HR-related practices while increasing results at the same time! Our focus. Your results.