As an employer, you understand the true cost of having an employee. You are very aware that far beyond the net pay the average worker sees direct deposited into their checking account are many pieces of the complete benefits package. You are most likely also aware that many of these benefits go unrecognized by your employees. The Bureau of Labor Statistics tells us the reality is that wages are only about 71 percent of total compensation and that the work force really has no idea how much their compensation truly is!
A "Total Compensation Statement" is a valuable tool for both employers and employees. It is a document that paints a full picture of the actual cost of an employee. It allows an employer to better budget for changes in staff or shifting wages and it shows employees all the benefits they receive including items they don't consider when they think of their "pay." It uncovers that "hidden paycheck" you provide such as company paid portions of medical, dental, vision, life, and disability premiums; vacation, sick, and paid time off; employer Social Security and Medicare taxes; and retirement benefits.
Employers can use this tool to proactively share their complete compensation offering as a positive piece of communication. Companies can help avoid turnover and increase morale as a result of employees being able to visualize the array of benefits they receive as a result of their employment. It is powerful to promote the full value of your company to those working there so they see it as a quality place to work. Baby Boomers are going to leave many opportunities open in the workforce, and it is increasingly common for companies to feel that attracting and retaining talent is a top challenge they face. Offering great benefits is half the battle. Communicating them effectively is the missing piece.
You can customize the delivery of this information. Many payroll providers can help you obtain data to disperse these statements at year-end. Some payroll processing companies, however, allow you to provide them on an ongoing basis via customized pay stubs. This style of presentation gives employees a continual reminder of the robust perks that are being paid on their behalf on a consistent basis.
The aggregate data you receive as an employer when breaking out cost this way can be another way to strategize your company decision making. If a company has high utilization of their health benefits and premiums are rising, you could look at the compilation of detail to find other areas to cut before increasing employee contribution or decreasing benefits.
Healthcare reform is going to change the way benefits are handled by employers, and how they're received by employees. Using total compensation statements can help both parties to better compare their current plans with what's available in the market. Part of reform is going to require some businesses to report the portion of benefit premiums they pay on W-2s at year-end. If you're already compiling this information you will be ahead of the game.
A popular shift in the delivery of company health benefits is to approach it as a reward system as opposed to a privilege. Employers that use this "Total Rewards" approach establish a program that incents individuals at an organization to meet specific goals. For example: A company could base part of their premium contribution on participation in a company sponsored wellness program. The higher the employee engagement, the more money the company puts toward their health insurance premium. With no compensation statement, this shift can sometimes unintentionally be communicated as a punishment instead of a visible company-paid benefit total increasing or decreasing on their pay stub (as a result of their participation), they only see their income fluctuating. In this type of reward structure, a benefit statement is a valuable and encouraging communication tool to help employees understand the concept of total rewards.
With proper technology and an initial data gathering process, Total Compensation Statements can be simple and accessible. The information that is available to you and your employees through these illustrations can be used for all to make better decisions. So much of your budget is spent on your staff. Make sure they see how much you actually invest in them!
Bethany Durham is a Benefit Solutions Consultant with Clark Insurance Solutions, a Reno based employee benefits firm. Bethany can be reached at bdurham@clarkandassoc.com or 775-828-7420.
