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If you have support staff, you know that the true cost of having employees goes well beyond the hourly wage or salary you pay them. Whether that extra overhead includes only the required taxes on their compensation or you offer an extensive package of benefits, consider sharing that information with your staff using a total compensation statement.
A total compensation statement shows each individual employee the dollar value of each component of their compensation. The purpose of an employee total compensation statement is motivation and shaping expectations regarding compensation. It’s a way for you to make all aspects of compensation, including benefits and noncash rewards, as tangible as the dollar amount on a weekly paycheck.
Without making this compensation explicit, your employees may not place a real value on the aspects of compensation outside of their regular pay. So, a total compensation statement helps make every compensation dollar you spend go farther. It also helps set expectations. For example, you may have given your employee a 5% raise each of the past five years. Will she expect the same this year? What if your business has slowed for some reason, and a 5% increase isn’t possible? Or the employee’s performance has slipped, and 5% isn’t warranted?
At its most basic, a total compensation statement should include:
- Statement of work arrangement and hours, for example “Full-time employee/ Regular work hours: Mon-Fri 8:30 a.m. to 5 p.m. with 1-hour lunch
- Statement of base compensation, including any increase implemented since the last total compensation statement
- Statement of bonus compensation, including conditions of payment (for example, at the firm’s discretion) and how amount will be calculated
- Salary/wages paid
- Bonus paid
- Mandatory employment-related taxes paid by employer (FICA, unemployment)
- List of paid holidays and wage value, if employee is hourly
- Number of personal days or hours, with wage value, if applicable
If you provide additional benefits, include those expenses:
- Medical insurance
- Disability insurance
- Life insurance
- Retirement benefits
- Training classes or college courses paid/provided by employer
- Non-cash compensation (gifts, travel, meals, etc.)
Deliver this report annually — usually in first quarter of the year, showing total compensation for the prior year. The total compensation statement should be at least a full page long to convey its importance and should be accompanied by a letter describing what it is, why you are providing the information and how to use it. Don’t skip this step! This is the expectation setting opportunity. Here’s a brief example:
Advisors with just a few employees and relatively straightforward cash compensation structures should be able to assemble a basic total compensation statement. If you have a larger staff and a more robust benefits package, you may be able to enlist the help of your benefits provider, professional employment organization or payroll vendor to put these together.
Whether it’s one of our corporate employees or the single assistant in an advisor office, the reaction to a total compensation statement is usually the same: amazement at how those “little perks” can add up to a significant percentage of the employee’s actual pay — the national average is 42 cents for every dollar of salary or wages. An annual reminder of the actual numbers and the underlying expectations helps align your employees’ goals with your business goals, resulting in greater efficiency, profitability and satisfaction.