The financial impact of COVID-19 is temporarily closing businesses, slowing down sales, and disrupting supply chains in the U.S. In a time when so many companies are having to make hard choices about compensation due to unforeseen budgetary constraints, could this be a good time for your organization to prepare and distribute total compensation statements?
This comprehensive report, which is different from compensation surveys, is also referred to as a total rewards statement or employee compensation statement. It is an annualized snapshot of the various compensation methods an employee receives beyond their paycheck. A total compensation statement is unique to each employee, rather than a general compensation survey that is collected from several employers to determine the median or average salary for a specific position, taking into consideration the region, industry, company size, qualifications among other factors.
Many of our clients provide total compensation statements to their employees annually for a myriad of reasons. The top 4 reasons are outlined below, but first, let’s discuss what is included in each statement.
What’s in a total compensation statement?
It’s easy for employees to focus solely on their annual salary or hourly rate and not take into account the thousands of dollars that you as the employer invest in them in other areas. These statements show base salary in addition to other cash compensation (bonuses, appraisal overtime, profit sharing, commissions, etc.). They also highlight benefits contributions—this is where the bulk of the value can be found. In addition to showing all the programs in which an employee is participating, the report also shows how much money the company contributes towards each of those programs on behalf of the employee. This is unique in that employees usually only see their monthly cost for benefits and not what the company contributes, so they rarely know the true cost of paying for a medical plan for instance.
Total compensation statements show the annualized amount that both the employee and employer contribute. Also shown with the benefits contributions is the estimated tax savings to the employee by being a part of pre-tax plans. And the report can showcase more than just health plans; it can also include contributions towards cell phone or company car stipends, training/professional development costs, 401(k), clothing allowance…really anything offered to the employee! And finally, the statements show the monetary value of all PTO, holidays and other leave time employees receive.
Attract top talent
Showing employees the full picture of their total compensation is generally a great tool for attracting employees. Say you have a great applicant for a role, but they’re hung up on negotiations of salary. Outlining the value of all benefits they will be receiving can show that you’ll actually meet or surpass what they’re looking for.
Retain valuable employees
The same applies to retention. If you have an employee leaving over a job opportunity that will pay them $0.50 more per hour, they probably don’t understand their full compensation value. That new job may increase their salary by $0.50/hr., but they may have to pay $200 more a month for the health plan. These statements are also a great tool to show employees the progress they’ve made year over year in regard to their compensation. Providing a statement annually that shows employees how much more they are making each year reminds them of the continuous growth opportunities available.
Increase participation in health benefits
Total compensation statements are a great way to remind employees about their health benefits. Many times, the annual Open Enrollment period is the only time an employee is considering their benefits outside of doctor visits. As a tactic to bring benefits to the forefront more than once a year, we see some clients providing total compensation statements to employees six months after Open Enrollment. Employee benefits packages are a huge cost to companies—why not make sure employees understand what’s offered and leverage it fully.
Boost morale
Total compensation statements provide your employees with a transparent understanding of how much you value them and invest in their growth and success each year, which boosts morale and can increase employee loyalty and satisfaction. Research shows that happy employees not only stay with your company, but their productivity can actually increase as well. Do everything you can to show your employees their value—total compensation statements are a good place to start.
Why now?
Even if you’re having to freeze raise considerations or cut some salaries, this could be a good opportunity to highlight all other perks employees still receive by being employed by your company. Cash compensation may be stagnant for 2020, but the total value of an employee’s package does not start and end with their salary. Putting together a statement that an employee can physically see can help this notion hit home.
PSA is here to support our clients as we all make tough decisions necessary to strive to keep businesses running smoothly. If you have questions about generating total compensation statements, feel free to contact me at landerson@psafinancial.com. Please also leverage our COVID-19 Business Resources for relevant updates and educational materials regarding the pandemic.
