What Is a Total Compensation Statement & Its Components
Do you offer your employees a benefits package? If you do, do they fully understand all of the benefits that they have access to? What about any hidden benefits that you offer that they might not know about?
And to take it even further, do your employees know how much you value them? Providing a total compensation statement can be a great way to show your investment in their success. Your employees already know what their pay is, but there can be times when some pay and benefits go beyond a normal salary.
Here’s What We’ll Cover:
What Is a Total Compensation Statement?
Your employees are part of the foundation of your business. Without them, you probably wouldn’t be able to have the business success that you do. Employees help to manage critical aspects of every business.
A total compensation statement is a way of you communicating an employee’s value to them. It highlights the compensation package, which includes things like base salary and benefits. The statement helps to paint a picture for an employee who might not fully understand their full compensation.
Several different things can get included in a total compensation statement. It depends on your payroll processes and how your employee’s salary is organized. And some businesses might offer a different range of benefits than others.
An employee usually receives a total compensation statement once a year. Receiving a total compensation statement can sometimes be a shock for an employee. They don’t always see the bigger picture when it comes to compensation.
What Are the Components of a Total Compensation Statement?
It can be quite simple or it can be quite complex. But a compensation statement organizes and highlights all the compensation you offer an employee. Some of the main costs that are included are gross wages, bonuses or other extra financial compensation.
It can also include things like insurance premiums, paid time off and any retirement plan contributions. The statement can often get broken into three categories.
- Direct compensation: your salary, hourly rate and any overtime pay. It can also include commissions or bonuses and incentive pay.
- Indirect compensation: areas like unemployment tax, social security tax or workers compensation insurance.
- Benefits: anything that is outlined in your benefits package. Things like vision, dental and health insurance. It can also include retirement plan contributions, relocation expenses or educational assistance.
Even though you are not obligated to provide a total compensation statement, they can help increase employee morale. The statements can also be helpful to retain your best employees by showing how much you truly value them.
You can also highlight the value of some other benefits:
- Gym memberships
- Tuition assistance
- Company discount programs
- Company vehicle
- Computers or laptops
- Cell phone service
- Stock options
Tips to Show the Value of a Total Compensation Package to Employees
A well-outlined total compensation package is how an employee can truly understand why they should want to work for your company. You want the personalized statements to be compelling and simple to understand. As well, you can use things like charts or graphs to help highlight the main areas you want an employee to recognize.
It depends on how many employees you have and the type of business that you operate. But you can take a few different approaches to communicate the statements to employees. They could simply get sent by email or posted securely online. Or, you could even print the statements off and mail them to your employees.
Do you feel lucky to have some of the employees that you do? What would you do without them? Providing a total compensation statement can help show your employees their true value to your company.
And when a current employee can see just how much you are investing in them, it can lead to increased loyalty and a higher likelihood of retention. Every business is different and some offer a wider range of benefits and extra financial compensation. However, it doesn’t matter how in-depth your total compensation statements are.
Implementing a system to regularly distribute statements to employees highlights their value. This can help lead to higher productivity and better employee engagement. And any additional benefits can be incentives to work towards.
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