It pays to discuss total compensation
A few years ago, employees were desperately hanging on to their jobs, crossing their fingers that the pink slip wasn’t going to be dropped on their desk, and employers were deploying every strategy to hang on to their employees. As we continue to creep out of the recession, new businesses are moving into northern Nevada and unemployment, while still high for our region, is decreasing. Sales are steadily increasing and we are starting to hear the “growth” word again. All good news.
From an employee’s perspective, they might be “looking” again looking at the new companies coming into northern Nevada and the new job opportunities they may bring. What? Wait! Don’t your employees know how hard you have worked to save their jobs, pay a reasonable wage, provide them with excellent benefits and fun perks? They may not. In fact, less than 19 percent of employers believe that their employees have a good understanding of their benefits, the value of those benefits and the cost the employer incurs providing those benefits. Now may be the perfect opportunity for your company to review the total compensation package you offer to your employees and educate your employees on the true value of their compensation, which often goes way beyond the value of their paycheck.
Total compensation, the benefits and compensation that you provide to your employees, is a key factor when looking at attracting new employees as well as employee retention and job satisfaction. Many options or benefits make up the total compensation equation, and require constant monitoring to ensure competitiveness in the marketplace and relevance to your employee population. Benefits, compensation and perks may include any of the following:
* insurance medical, dental, vision, disability, life etc.
* “cutting-edge” benefits long-term care, sabbaticals etc.
* paid time off, vacations, leave of absence, sick time etc.
* flexible spending account plans
* alternative work schedules and telecommuting
* employee assistance programs
* commissions and bonus plans
* savings and stock plans
* profit-sharing programs
* retirement options 401(k), PERS etc.
* tuition reimbursement
* on-site childcare
* gym memberships
Employees frequently understand their cash compensation or what they take home in their paycheck; however few understand their full compensation. How do you calculate this and then how do you effectively communicate it to your employees?
First, determine what you want to include in the total compensation package. Review the listing above and include everything that you are offering to your employees, including benefits they pay for fully or partially. Second, determine the value of those listed benefits. For some benefits that will be easy and straightforward. For instance, if you pay for a group health policy for the employee and it costs you $400 per month to do so, the annual value of that benefit is $4,800. If you only partially cover group health benefits, then you would use the same formula applied to the portion you do cover. Keep in mind that the employee should also understand the true value of a group health policy over an individual policy. To determine that value, you may require the assistance of your health and life broker. For each benefit you offer do your best to calculate not only the actual monetary value of that benefit but also the non-monetary value (for instance, quality-of-life aspects of benefits such as flexible schedules, sabbaticals, health and wellness programs). Finally, determine what the best strategy is for communicating this to your employees. Do you want to create a letter and stuff it in their check or pay statement? Do you want to create an opportunity to sit down individually with each employee and their manager to review? Maybe you want to consider some sort of graphic that outlines or describes their full compensation. How can you make this available online? There are many technology resources available in today’s market that can track this all year long for you and make it available on-line to your employees 24/7.
Once you have communicated this information to your staff be ready for a variety of responses. Some employees may thank you and appreciate having a better understanding of the value of what you provide to them. You may also hear grumblings, and employees who have issue with the benefits offered will take advantage of the opportunity to share those. In either case, thank your employees for their feedback. Listen to what they have to say and use it as a chance to assess whether some changes need to be made to your benefit offerings. You want this total compensation package to be relevant for the employees and be utilized as a retention tool and as a method to attract new talent to your company.
Remember that this total compensation conversation is a great way to address requests for wage increases when the company is unable to meet such requests due to monetary constraints or other business reasons. Reminding an employee of the true value of their total compensation and the actual cost of that total compensation to the company is very helpful when discussing with an employee the reasons why a pay raise is not something that can be provided at that time.
Sarah Sommers is chief executive officer of Solutions At Work, a Reno-based human resources consulting firm that specializes in providing HR and payroll services to businesses and non-profit organizations. Contact her at 775-827-9675 or email@example.com.
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