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In a working world where the grass is often greener elsewhere, employers must take extra steps to demonstrate commitment to their employees. One strategy is to offer a total compensation statement detailing the exact dollar spent on each employee’s salary and benefits. This information personalizes the value of each individual and serves as an excellent recruitment tool.
Our guide explains the benefits of creating a total compensation statement template and what to include in yours.
A total compensation statement template is a document that breaks down an employee’s compensation and benefits package, including salary, bonuses, health insurance, retirement plans, and other perks. It’s a comprehensive summary of all the components that make up an employee’s total compensation package, beyond their take-home pay.
For example, Bureau of Labor Statistics data highlights the distinct difference between employees wages received and what employers actually spend on them:
Your employees might not understand this information unless you present it in a detailed statement.
For employees to gain an in-depth understanding of what they receive alongside their regular pay packet, it’s essential to include all components of their compensation package. Here are some common elements to feature in your total compensation statement template:
Direct compensation is the money employees receive in their pocket for the work and hours they complete. This type of compensation is easy for employees to understand and visualize; typically, it’s deposited into their bank account so they can spend it as they please, including buying food and paying their bills. Direct compensation includes:
Indirect compensation is the portion of their pay packets that employees often forget about. Employers are required by state or federal law to provide some of these costs, while others can help attract and retain talented team members. Indirect compensation includes:
Take a look at the template below for an example of how you can structure your total compensation statement. Download a customizable version of this template here.
Total compensation statements are easy to produce if you use payroll software. And they can strengthen the employee experience in the following ways:
Compensation is an important factor in attracting and retaining top talent—30% of employees admit they’ve previously left an employer whose benefits weren’t up to scratch. If you’re experiencing high churn rates or aren’t hiring high-caliber candidates, the problem might be how you communicate your total compensation package.
In this case, Employee Retention Expert Cara Silletto explains why compensation education is crucial:
“Employees may be leaving jobs because they think they’re underpaid, but oftentimes they may simply misunderstand what their total compensation is. That’s why it is so important for employers to educate their staff on the total investment they are making in them. Sharing a total compensation statement at least once a year can be eye-opening for employees. When they realize the investment their company makes in them day in and day out, they may be more likely to stick around longer.”
Education leader Lacie M Couzin recaps a near miss when her son almost left his role due to a misunderstanding about his total compensation.
“He was looking to switch companies because of what he had heard about a friend’s salary change. When we discussed the benefits at both organizations, the potential for advancement, and the bonus structure, switching was a wash.”
Laying out your entire compensation package in black and white is an essential exercise in transparency. It signals to your employees that you’re willing to be entirely honest about what you spend on them and aren’t interested in cutting corners or hiding certain information from them. In a recent Compensation Trends for 2024 report, 59% of employees believe salary transparency only happens when companies communicate the entire compensation package to their workers, including additional benefits and bonuses.
Executive Leader Mee Hee Smith explains the value of being candid by encouraging employees to explore their personal situations.
“Even when not considering a job change, that transparency could get someone at least to look and learn more. People value different things dependent on life stage and needs.”
Employee morale has taken a hit recently, as layoffs have plagued the tech, media, and finance industries, and the cost of living continues to rise. Two in five salaried employees didn’t receive a raise in 2023; for the rest, their raise was 25% lower than in 2022, according to Bamboo HR.
Providing details about total compensation can boost morale and engagement even if salary increases aren’t realistic this year. When employees see that you’re actively contributing to other areas of their compensation beyond basic salary, they understand that you’re invested in them.
Ideally, your company will already have a strong benefits communication strategy, so your staff knows what is available to them. But for too many organizations, this isn’t the reality. For example, CNBC’s Your Money Survey found that 46% of people don’t know what investments are in their 401(k).
A total compensation statement can raise awareness of what employers contribute toward their employees’ retirement savings, health plans, and numerous other perks and benefits. You might consider incorporating charts, graphs, and other visual aids to help employees visualize their total compensation package.
Total compensation statements can lose their impact if you haven’t put the necessary planning and prep work into them. Be aware of the following pitfalls to avoid damaging morale or trust in your ranks.
Every number on your total compensation statement should be triple-checked for accuracy. Any errors can trigger employees to question the company’s integrity, leaving many feeling under-compensated and undervalued.
Similarly, omitting certain benefits or bonuses can also damage the credibility of your total compensation statement. Ensure you include all relevant and current information to avoid confusion or misunderstandings.
It’s important to ensure that all employees are receiving accurate and fair compensation. Your workers may discuss or share the information in their total compensation statements. Any discrepancies in compensation can lead to feelings of unfair treatment and mistrust within your team. Review and update compensation packages for all employees regularly as part of your greater DEI strategy.
Total compensation statements should be updated and distributed regularly, such as annually or during performance reviews. Infrequent timing can cause employees to feel they don’t have a grip on their total investment, which can be unnerving and inconvenient for those who want to be in the know.
Need a TL;DR? Keep these fundamental tips in mind when building and distributing your total compensation statements:
Benepass offers numerous benefits and perks that can be game-changers for employee retention strategies. From lifestyle spending accounts and professional development benefits to health savings and flexible spending accounts, adding these to your employees’ total compensation packages is straightforward.
Learn more about how to create a comprehensive and engaging total compensation statement for your team by contacting Benepass today for a free demo of our platform. Alternatively, contact sales@getbenepass.com with any queries.
