Employee Benefit Solutions: Why add a total compensation statement?
- Scott Holcomb
- Mar 17, 2015
- 3 min read
What is a total compensation statement? Sometimes referred to as a benefits statement or "hidden paycheck."
Defined as a document showing an employee’s total compensation, including all cash income and the value of all benefits.
With health care costs rising and the Affordable Care Act (ACA) implementing new health coverage requirements and penalties for employers, many companies are faced with deciding whether to increase their health insurance contributions or to allow employees to suffer the impact of increasing costs.
When the employer decides to absorb health coverage costs, employees may remain unaware of the “hidden” benefits they are receiving. This is one of many reasons why a total compensation statement is useful for sharing with employees what their true total compensation is.
Total compensation statements communicate the entire value of an employee’s compensation package, including wages, which they already see, and the hidden cost of the benefits that employers provide.
Although total compensation statements are not legally required, they demonstrate to employees the monetary value the employer is providing beyond the standard paycheck.
Knowing the full value of their compensation packages can help increase employee morale and loyalty, and these statements can serve as a basic but useful retention tool.
What’s included in a total compensation statement?
A total compensation statement includes the monetary cost of all forms of compensation on the part of the employer. This includes gross wages and extra financial compensation, such as bonuses or commissions, as well as the employer-paid portion of retirement plan contributions, insurance premiums and other benefits such as dry cleaning services.
Following are items that might be listed on a total compensation statement:
Salary/hourly wages
Bonuses
Commissions
Stock options
Employee stock purchase plan
Retirement plan—401(k) matching contributions, pension plans, etc.
Educational or employee assistance programs
Social Security contributions
Paid time off—including vacation time, sick leave, holidays, jury duty, etc.
Insurance—including health, dental, vision, life, disability, etc.
Wellness rewards—discounts, cash bonuses, etc.
Relocation expenses
Outlining the total cost of all these benefits can be eye-opening for your employees and can help them better appreciate the compensation package you offer them.
Providing the Information
In order to offer a total compensation statement to employees, both direct and indirect compensation totals must be compiled. Direct compensation refers to compensation paid directly to an employee, such as the employee’s salary.
Indirect compensation includes any forms of compensation that are not paid directly to an employee, such as employer-paid insurance premiums, retirement benefits and paid time off.
The total compensation statement can provide a clearer picture to your employees and a very real reminder of the company’s financial commitment to them.
The #’s to back it up:
95% of employees receiving a total compensation statement have a greater understanding of their benefits
Almost 80% of employees that receive a statement are more likely to stay with their current employer
Communication
Just passing out the statements without the proper education can devalue the statement and lead to a misunderstanding of what the purpose behind showing them to your employees was designed.
Whenever possible, in meetings, emails, or webinars, provide the necessary education of the information you are providing, ask for feedback, and offer one on one evaluation of individual statements.
This will drive home the importance of the documents and allow you to learn what information you have provided is important to your employees and what you can add or subtract moving forward.
Without communication from the company a vital step is lost in the value of distributing a total compensation statement in your organization.
Many employers do not offer total compensation statements because of the work involved in putting them together. Don’t let this common obstacle stop you from sharing the value of your compensation packages with your employees.
Accurate Insurance Solutions can offer the support and assist you in administering a total compensation statement for your employees.
To learn more about total compensation statements and for help compiling the necessary information to give to your employees, contact Accurate Insurance Solutions at 813-994-4114 or visit www.accurateinsurancesolutions.com
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