Finance News & Insights

Don’t overlook the advantages of total compensation statements

Employers across the country indirectly increased employees’ compensation recently and in many companies, it seemed like nobody noticed. Why? Because management was guilty of a big oversight.  

Companies didn’t explain to employees what they did — and what it was worth.

The compensation increase likely took one of these forms:

  • increasing the amount you paid for their health insurance
  • giving them additional paid time off, or
  • boosting the amount you contributed to their retirement funds.

But none of those would seem like a “raise” to employees if employers don’t  tout it as such.

Show ’em what they’re really paid

That’s the beauty of total compensation statements. They allow you to show employees that their pay is increasing — even when you can’t give them a traditional raise — all without making you come off big-headed about it.

The result is increased morale and, hopefully, productivity.

You won’t get the most out of them, however, if you fail to take BOTH of these steps when issuing them:

  • breaking up each element of an employee’s compensation into its own line item, rather than lumping them together (i.e., separating medical insurance from dental and vision, rather than listing them all under “health benefits”), and
  • comparing what you paid for each element of a person’s compensation this year versus what you paid for it last year (i.e., 2013: $1,500 versus 2012: $1,200).

Both steps make your entire compensation package seem more well-rounded and generous.

Essential elements

Since it’s crucial to break down each element of an employee’s compensation, you’ll want to make sure your total compensation statements include these line items (where applicable):

  • Base salary/hourly rate
  • Overtime paid
  • Bonus compensation paid
  • Paid holidays — and the wage value of each if the employee is hourly
  • Sick days issued (not taken)
  • Vacation days issued (not taken)
  • Other forms of paid leave — personal, medical, bereavement, military, jury duty, etc.
  • Medical insurance — include the amount paid by the employer
  • Dental insurance
  • Vision insurance
  • Disability insurance
  • Life insurance
  • Retirement contributions
  • Tuition assistance
  • Training courses paid for by the employer
  • Non-cash compensation — gifts, travel, meals, tickets, etc.
  • Employee assistance programs offered (list the cost of each program separately), and
  • Relocation expenses.

Finally, you’ll want to add up how much you paid out in each of these categories and list it under “total compensation.”

Make it stand out

These statements are important, so you want to do your best to convey that importance.

How? Make it at least a full page long and issue it separately from an employee’s regular pay stub. You’ll also want to include a letter describing what it is, why you’re providing it and how employees should use it.

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