How-To Series

Prove Their Worth: Creating and Using a Total Compensation Statement

By

Lauren Rogers

| Sep 7, 2018

According to the U.S. Bureau of Labor Statistics, employer-paid benefits in private industries in 2017 was 30.5% of the average worker’s total salary. Here’s how you can give your employees a comprehensive, easy-to-read look at the benefits you provide and help them understand what you invest in them beyond their wage alone.

Step 1: Choose the benefits to include

Every company will have different benefits they offer their employees, and it’s up to you to decide what you want to include in a total compensation statement. But the more comprehensive, the better.

It’s important to include a wide spectrum of the benefits you offer so your employees can see the ones that matter most to them. Plus, different generations value different benefits. For example, according to the Society for Human Resource Management (SHRM), millennials are less likely than baby boomers to report health insurance as the most important benefit, and are more likely to value paid time off. Including as many different benefits as possible helps ensure your document will resonate with all employee groups.

No matter how you choose to prioritize your total compensation statement, here are the minimum types of benefits you should include. 

  1. Year-to-date earnings

To start, you need to include your employees’ earnings on this statement. It likely will be the biggest piece of the pie and is a significant part of total compensation.

Bonuses can be added in this section, but consider placing them in a completely separate section to highlight how a bonus is separate from employees’ regular compensation. This information should be readily available from your payroll software.

  1. Paid time off

While you could simply list the paid time off your company offers on the statement, it is impactful to assign a dollar amount to that time. Employees generally know how much time off they are allowed or accrue each year. Seeing that you provide 15 vacation days and five sick days is not new information to them (or shouldn’t be, anyway). But seeing how much that time costs your organization can give them a new perspective.

Alternatively, you could include employees’ current available PTO balance. Showing employees how much PTO they would lose if they pursued another opportunity might persuade them to stay.

If you award PTO, you still can include the days employees have available to use on the total compensation statement, but if you do that, you should not include a dollar amount with it. You may need to make a distinction between PTO that’s been used and time off that’s been awarded, but unused. Some companies opt to include PTO that’s already been used as part of the year-to-date earnings.

  1. Benefits

Highlight employer-paid portions of benefits like insurance plan premiums and 401(k) matching.

  • 401(k)/retirement matching: Only include the employer contribution – if you don’t make a contribution, leave this section out. Seeing that they’ve set aside part of their own salary isn’t truly a benefit, but seeing your contribution to their retirement and the dollar amount is another story – and an impactful one. This information may be available through your payroll software, or you may need to gather it from your 401(k) provider. Depending on your vesting schedule, you might also choose to reflect the vested and invested match dollars.
  • Insurance coverage: Include everything your company pays a portion for, including health, dental, vision, life and short- and long-term disability. Employees don’t always understand that even though they pay a premium for their insurance, their employer likely is paying the lion’s share; not only for them personally, but often toward the cost of dependent coverage as well. Through this statement, you can show them how much you invest in their health and their family’s health. Seeing these line items also can help employees understand what their benefits are, which may help them make decisions during open enrollment.

Step 2: Build a total compensation statement

Gather the information and present it in an understandable format. You want to have a statement that includes all of their benefits and shows their total compensation with a “price tag.” Your end goal is to present a dollar amount that’s more than what the employee recognizes as his or her salary. The difference between the two figures could be thousands of dollars.

The right software will help you gather this information efficiently, although if you have different systems for each type of benefit (like one system for payroll and another for HR or benefits administration), it will take additional time to collect it manually.

Using Word or Excel templates

You may want to create a template in Word or Excel that allows you to compile this information in an easy-to-read format. A graph helps visually illustrate that an employee’s salary is only a piece of their total compensation. Unless your information is stored all in one software, you’ll need to gather it and plug it in for each employee, because every employee’s benefits will be different.

Keep in mind this manual approach is not scalable. Once your head count grows, it will be incredibly difficult to keep up with updating this information for every employee. And, there’s the added danger of not including all the correct information, or giving the information to the wrong employees.

Consider software with drag-and-drop functionality

With a software solution that keeps all of this information in one place, it’s as simple as dragging and dropping what you want to include on employee statements. Every employee’s statement is created for you. With the right employee self-service technology, that information can be readily available to your employees whenever they’d like to see it, which may come in especially handy if they’re considering another job offer … but only if they know how to access their information.

Step 3: Distribute and market your total compensation statement to your employees

When the statement is ready, you need to find a way to get your employees to read it. Consider having an executive such as the CEO or VP of HR send an email at the beginning of the new year (or another time that’s important to your business), thanking your workforce for their continuing efforts. This email should include instructions on how to access their total compensation statement and why it’s important.

You also may consider reminding your employees about their benefits statement around performance reviews or after a new benefit has been added. For example, if you’re announcing additional vacation days or paid gym memberships, take the opportunity to remind employees of the other benefits you provide. Some organizations choose to send them around the same time as W-2’s, when employees are already expecting to review their annual tax documents.

Benefits that don’t have a dollar amount attached, like flex time or the ability to work from home, can be mentioned in the email. While you might not list these benefits within the statements, it can be a good time to remind your employees of their access to these benefits.

Be conscious of the timing of your email or announcement of these statements. You don’t want to make employees feel like your document is misleading or you’ve sent it to them to explain why no one is getting a bonus or raise this year. Take great care not to have inaccuracies or include something on the statement more than once. Without software to assist you with this, you’ll need to be extra-diligent to not count a benefit twice or including a benefit that’s not actually a benefit, like expense reimbursements.

You may consider setting up a survey in which employees can share input on what they’d like to see included in such a statement. A survey also gives you the opportunity to ask employees which benefits they would like to see in the future.

How a total compensation statement can aid retention efforts

Total compensation statements can be a powerful retention tool. According to a 2015 study by SHRM, 22% of workers report they have accepted, quit or changed jobs because of the benefits – other than salary or wage level – that an employer offered or failed to offer.

Helping members of your workforce understand the value of the benefits you offer may make them reconsider taking another job, especially if your benefits package is robust. Ensure the statement is accurate and that employees know where to find it, and it will be that much harder for your top talent to jump ship.

About the Author

Lauren Rogers

As a communications specialist at Paycom, Lauren Rogers keeps employees abreast of company news and events, and provides insight to industry leaders regarding issues affecting human capital management. With experience in marketing and communications, Lauren has written blogs and other materials for a variety of businesses and nonprofits. Outside the office, she enjoys gardening, testing new recipes and sipping something caffeinated with her nose in a book.

See more posts by Lauren Rogers