Total compensation transparency is steadily becoming an integral differentiator for organizations when it comes to talent recruitment and employee retention. Traditional salary discussions consist of the employee salary + bonuses and do not typically include a review of additional benefits and compensation that are part of the total compensation statement. By not reviewing or discussing the overall total compensation for the position, whether current employee or candidate, there is significant value that may be missed leading to a disconnect when it comes to compensation expectations. While some absent benefits may be obvious, others may be overlooked or are easily forgotten. A total compensation statement can provide employees and candidates alike with a broader understanding of what benefits their employer provides or will provide, above and beyond their base salary and traditional comp.
Organizations that use total compensation statements, which include supporting compensation data, not only help employees and candidates understand their full compensation package but also build loyalty and increase overall retention. After all, in the current labor market, you need to do everything possible to bring in talented candidates and keep employee satisfaction high. Utilizing a total compensation statement may be one strategy to help you address your attraction and retention challenges when used effectively. It is important to note that a compensation statement is not something that is shared or distributed frequently throughout the year and, in some cases, can be viewed negatively if used as justification for not providing an increase in salary or a promotion. It is most effectively used as an educational tool to promote transparency of total compensation as part of an annual compensation review for an active employee, or during compensation discussions with a new candidate.
How Is Inflation Impacting Today’s Talent Challenges?
During times of high inflation, employees generally demand higher wages to keep up with rising prices. Today’s rising inflation and current labor shortages are pushing businesses to respond to employee demands and increased wage requests. Employee wages and salaries are expected to continue to grow through 2022 and into 2023. Consequently, some organizations are revising their budgets for employee compensation and benefits to keep up with the market. For others, that’s not possible. A total compensation statement can help you effectively communicate the full value of the benefits you provide, especially at a time when employees are seeking higher wages, whether that be driven by inflation or labor market conditions.
What Is a Total Compensation Statement?
A total compensation statement helps employees understand the full value of compensation provided by their employer or potential employer. This statement highlights the monetary value of the complete benefits package—including any perks that may be overshadowed by traditional benefits— and gives employees essential information about their overall compensation beyond salaries.
A standard total compensation statement may include information relating to:
- Salary
- Bonuses
- Commissions
- Stock options
- Stock grants
- Employee stock purchase plan
- Retirement plan
- Social Security contributions
- 401(k) matching contributions
- Paid time off
- Coverages for health
- Life and disability insurance
- Flexible spending account
- Wellness rewards (e.g., discounts and cash bonuses)
- Employee assistance programs (EAPs)
- Relocation expenses
- Leaning and development opportunities
- Flexible work arrangements (e.g., remote, hybrid, and flexible schedules)
These are only a few examples of information organizations typically include in a total compensation statement. The information included can vary based on the organization and employee benefits provided.
Leveraging Total Compensation Statement to Help Address Today’s Talent Challenges
Zywave’s 2022 Attraction and Retention Benchmarking Overview revealed that attracting and retaining employees has been a persistent struggle for businesses since the start of the COVID-19 pandemic and remains so today. In fact, more than 80% of businesses expect these struggles to continue through 2022.
A total compensation statement may provide your business with a persuasive tool to aid in your retention efforts by showing employees the total value of the benefits you provide. Yet, according to PayScale’s 2022 Compensation Best Practices Report, only 40% of organizations in the United States use total compensation or total rewards statement. However, helping employees understand their total compensation can raise morale and may increase company loyalty and retention by:
- Increasing employee awareness of their benefits and how much those benefits cost the organization
- Providing a dollar amount for benefits that do not seem to have a tangible monetary value
- Promoting the idea of total rewards beyond only a paycheck
- Raising employee morale because they tangibly see the array of benefits offered by their employer
- Reducing the workload for HR professionals by eliminating the need to manually prepare, print, and mail statements to each employee
- Showing potential recruits their total calculated compensation on top of their base compensation to make your organization more competitive in the hiring process
- Helping establish open and honest communication
- Guiding employee performance and career development conversations
In contrast, there are also reasons why you may choose not to use a total compensation statement. Some businesses may be hesitant to use them, fearing it could lead to employee discontent or comparing benefits with others, including those outside the organization. Also, providing employees additional benefits may not be the answer or, in some cases, an option for some businesses. To address these concerns, you may opt to provide comparative market data around the position as part of attracting employees or in annual compensation reviews.
Summary
Although putting together a total compensation statement might be an additional commitment in time for HR, including gathering and presenting benefits data, the value to both employees and candidates alike will be worth the added time spent, especially to combat current retention struggles.
