"When evaluating compensation, it’s important to consider not just wages and salary, but the total rewards of a position."
— Kevin Hallock, Professor and Dean of the Industrial and Labor Relations School Cornell University
In today’s working world, total rewards or total compensation has lost its value, thrust aside and regarded as an unnecessary and tedious administrative task. Employers need to consider the pressing reality that most of their employees don’t fully understand the depth of their compensation packages aside from wages or salary. Corporate America has a high rate of total compensation illiteracy, and the side effects of this widespread problem manifest themselves in high turnover, low retention, and an unmotivated workforce.
To one degree or another, every company deals with turnover and unmotivated employees. You can battle this common issue effectively by simply unpacking your total compensation package through clear presentations and consistent communication.
What does promoting total compensation accomplish?
Total compensation demonstrates to employees their worth to a company. When they see that they are cared for and invested in, employees show more loyalty and satisfaction in their jobs. Employees who are satisfied are more productive. Benefits packages have hidden value that may not be understood without proper presentation and analysis. For instance, take a look at the typical total compensation example below:
Base Wages $40,000
Bonus $1,000
Total Earnings $41,000
Total Employer-Provided Insurance $9,700
Health Savings Account $1,500
401(k) $1,200
Cell Phone Allowance $600
Total Benefits $13,000
Time Off (PTO, Holidays, Floating Holidays) $2,800
Total Compensation $56,800
The example shows the hypothetical employer bears the burden of a $13,000 cost to provide benefits to its employees, which constitutes 23 percent of the total compensation. That is commensurate with the U.S. Bureau of Labor Statistics’ (BLS) news release on “Employer Costs for Employee Compensation.”
According to BLS data, of the $33.49 average hourly cost per employee in March 2015, $10.61— slightly more than 31 percent of the total—went toward various benefits. Additionally, some companies, such as Google, have perks such as a free limitless meal plan valued at $15,000. With the meal plan included in the total compensation template above, the package equates to $71,800, which almost doubles the employee’s base earnings.
Even if you can't afford to have benefit packages like Google’s, you can still articulate the value of your compensation aside from wages or salaries. That will increase the benefits’ perceived value to employees.
Bottom line
Some organizations provide total compensation statements, but you can always make improvements or adopt some of the following helpful methods:
- Comprehensive statements are worth the time. When you include fringe benefits, perks, and wellness incentives or discounts in your comprehensive statements, you communicate to employees that their personal lives outside work are also important.
- Personalized compensation statements. Personalized statements break down the value of benefits for each employee dollar-by-dollar to help employees feel informed and valued. When you individualize detailed compensation statements, employees truly can see how much the company is contributing to their well-being.
- Communicate frequently, and use technology. Employers can use creative ideas such as quizzes or games effectively to inform and remind employees of their total benefits. Some companies reward employees who attend benefits seminars with gift cards and other goods.