Compliance Corner: Q&A on Communicating Total Compensation

isolved's Benefits' Big Impact report found 82% of employees consider benefits as part of their total compensation when deciding to accept a job offer or stay within their current position. For employers, this means that communicating total compensation is important for both recruitment and retention initiatives.

In this month’s Compliance Corner blog, HR Services’ Senior Human Resources (HR) Consultant Eric Benzel is answering questions about the value and benefits of calculating total compensation, as well as providing communication tips for employers.*

1. What’s the difference between salary and total compensation?

Salary is the amount of money employees receive on their paychecks for the work performed each pay period. Depending on the position, it can vary each pay period based on the number of hours worked (hourly) or be a fixed amount (salaried). Conversely, total compensation includes salary as well as the value of other benefits the employee receives, such as health insurance, paid time off (PTO) and 401(k) retirement plans.

2. What should be included within total compensation totals?

Total compensation calculations should include any and all compensation, benefits and perks provided or paid for by the employer. The list will always vary from company to company, but common items include:

• Salary/base pay

• Paid time off (vacation, sick time, holidays, parental leave, bereavement, jury duty, military leave)

• Insurance (health, dental, vision, STD, LTD, life, FSA/HSA)

• 401(k)/retirement plans

• Tuition reimbursement

• Learning and development programs

• Bonuses/commissions/profit-sharing

• Employee assistance programs

• Childcare assistance

• Free food/beverage

3. How can employers accurately calculate total compensation?

Employers should use a consistent and standardized measurement and calculation period for all employees. For example, employers should base the total compensation calculation on a specific paycheck date, using current salary, variable pay targets, benefit eligibility and benefit elections to calculate an annualized projection for all values.

4. Why should employers communicate total compensation?

Communicating total compensation can serve as an important retention tool. Especially in today’s market with increased competition, being able to clearly communicate the total value of salary and benefits can be a key differentiator for employers. Employees can more clearly understand and put a value on the benefits they receive, and this can create more buy-in with the company and culture.

5. How should employers communicate total compensation?

Total compensation communications should be personalized. Each employee should receive a unique and individual total compensation statement that reflects their personal total compensation for the year. Statements should be communicated to employees in writing at roughly the same time. The total compensation statement should include supplemental documents, like FAQs to explain the why and how behind the statement, and should also include contact information for employees who have questions.

6. When should employers communicate total compensation and how often should total compensation be recalculated?

Generally, total compensation should be communicated on an annual basis, most commonly around the beginning or end of the year, or at a halfway point during the year.

* This blog is not legal advice. Please seek proper legal advice.