Do your employees feel like they’re being underpaid? When you run a small business with fewer than 100 employees, it’s hard to compete with larger companies on salary. However, the other benefits that you offer your employees, like your group benefits plan, also provide a lot of value. It’s easy to communicate salary with employees, but it’s harder to quantify the many other benefits they’re receiving.
Total compensation refers to the total value of the monetary and non-monetary rewards your employees receive in return for their work, and it includes much more than just salary. Making your compensation clear can have a lot of benefits for your company, but first, you need to understand exactly what total compensation is. Here’s a quick guide to understanding total compensation.
Components of Total Compensation
The most visible aspect of your employees’ compensation is their salaries, but that’s not the whole story. Your group benefits plan is a major part of their compensation. Coverage for prescription medications, dental care, vision care, extended health services, life insurance, and other services can be worth a lot of money to an employee over the course of a year.
Compensation also includes any cash your employees receive on top of their regular salaries, like commission payments or bonuses. Paid vacation days, paid sick days, and paid personal days are also valuable. Your contributions to government benefits, like the Canadian Pension Plan, also have value that your employees may not be aware of. Additional benefits, like the use of a company car, a company cellphone, or employer-paid training programs also fall under the umbrella of compensation.
Why Total Compensation Matters
Salary is very visible for your employees, and every time they receive their paycheques, they see the dollar value. The other benefits they receive are less visible, and they may not even realize you’re offering other benefits, or they may not realize how valuable they are. Most employees vastly underestimate their total compensation. This means business owners aren’t getting the maximum return on their compensation dollars.
If employees feel like they’re not being paid fairly, their morale can be affected. When employees have low morale, they won’t perform as well at work. They show up late, aren’t enthusiastic, and start making more errors. All of this makes them less productive, and for your business to stay competitive, your employees need to be productive. Low morale also contributes to high turnover, and when you’re a small business owner, you don’t have the time or money to be constantly replacing employees.
By communicating your employees’ compensation, you can reduce these problems. When employees see how much their group benefits and other overlooked aspects of their compensation are worth, they’ll realize they’re appreciated.
How to Communicate Total Compensation
To communicate compensation to your employees, provide them with total compensation statements. These statements give employees a breakdown of all the benefits they receive from your company, as well as the monetary value of each benefit. At the bottom of the statement, display the total value of the benefits. These statements bring visibility to your company’s compensation that wasn’t there before.
How do you calculate the value of all your benefits? It’s timeconsuming and complicated to do it on paper, and you may make mistakes. If employees discover errors in their statements, they may lose trust in you.
To produce these statements quickly and accurately, turn to a human resources information system (HRIS). These platforms help you manage your employees’ insurance and benefits in one place, and they streamline your benefits administration process. These systems are affordable for small business owners, and with all the time you’ll save, your investment will pay off before you know it.