As a manager or HR professional, you know that your investment in your employees is far greater than just the salary you pay. But do your employees understand that? It may be time to communicate this information with something known as a Total Compensation Statement.
Before we begin, let’s quickly break down the “real” costs of compensating an employee. According to the Bureau of Labor Statistics, a division of the U.S. Department of Labor, private industry employers spend more than 30% of their total outlay per employee on benefits. That means that salary accounts for just slightly more than 2/3 of your expenses.
These figures represent actual, hard dollars paid out by your company or organization…money that is not necessarily reflected on a paycheck. Total compensation is a measure of how deeply invested you are in your employees…a commitment that should absolutely be communicated back to those individuals. The way to do this is with a Total Compensation Statement, which breaks down all the compensation and benefits costs you incur for each employee. These reports, which should be prepared annually, document your investment in your employees and demonstrate how highly you value them.
Let’s take a look at the components of a Total Compensation Statement. Broadly speaking, it is divided into three categories: financial compensation, benefits, and work/life programs.
Financial compensation is fairly straightforward, and should cover your expenditures for the employee’s base pay, commission, overtime, and bonus.
Benefits can be more detailed, but should document all varieties of insurance, all mandated benefits such as Social Security taxes and unemployment insurance, any retirement or profit sharing programs you offer, and all paid time off.
Finally, include your work/life package on the statement with costs to provide such programs as tuition reimbursement and training. Some items on this list, such as a flexible work schedule, may not be accompanied by a fixed cost, but nevertheless they should be documented.
If time permits, schedule a meeting to go over this statement with your employee. He or she may have questions regarding the package, which you should try your best to answer. Remember, you’ve taken great care and time to put your compensation packages and benefits programs together…and providing your team visibility into all you offer them is a great way to build loyalty, job satisfaction, and productivity.
Preparing Total Compensation Statements does take time, and represents a bit of work. To simplify and streamline the process, visit us online at HR360.com. Our Total Compensation Statement Builder is an interactive app that lets you prepare these statements in just minutes, rather than hours. Of course, you’ll also find detailed information regarding key aspects of employee compensation, including our Salary Benchmarking Tool. Thank you for joining us today for HR Over Coffee.