We’re in a candidate’s market. Top talent is becoming increasingly elusive and companies are required to differentiate their job offers and stand out from the rest in order to attract and retain the most talented employees. And as a result, employees are able to demand more from their employers.
And they’re not just looking for more money. They’re looking for other types of benefits that will help improve their quality of life, too. That’s why total compensation is becoming a more widely used term in business today.
What Is Total Compensation?
The term total compensation describes not only the salaries or wages your employees receive, but it also includes the benefits, programs, plans, and other opportunities that you offer as part of a rewarding work environment. It’s a more holistic approach to compensation.
It includes the essentials that employees come to expect, including base pay, variable pay based on performance, and cash prizes and bonuses used to motivate. It may also include health benefits, life insurance, and pension benefits, which are commonly offered as part of employees’ compensation packages.
But it also includes intangible benefits that make work rewarding and add value to employees’ lives, including professional development opportunities, training and seminars, on-the-job skills learned, and the opportunity for seniority and moves up the corporate ladder.
In addition, many businesses are now starting to include additional perks and work-life benefits in their compensation packages, which serve to improve work-life balance, whether by helping employees save on costs, save time, or reduce stress, such as on-site daycare or discounted gym memberships.
All of the benefits come together under total compensation to create a strategy that effectively supports your employees’ security, protects them from financial hardship, supports them in retirement, and improves their quality of life.
Why Is It Important?
Total compensation is a vital tool businesses use in order to make their employees aware of all they are receiving from their organizations, in a way that is clear, relatable, and personal.
By sharing a breakdown of the value of employees’ compensation packages, employers can better attract talent, retain top employees, improve loyalty to the company, and boost motivation and productivity. It can also strengthen your employer brand and reputation.
If employees are only aware of the dollar amount of their salaries or wages, they can come to feel unappreciated and undervalued. Sharing the other benefits you offer and showcasing how they can help employees increase their quality of life can create a happier and more engaged workforce, which is vital in today’s cut-throat and competitive business environment. It also helps show workers what they’d lose if they were to move on to other employment opportunities, which can reduce turnover and the associated costs.
Communication Is Key
To gain the advantages of a holistic total compensation strategy, however, you must effectively communicate the benefits with your individual workers. Not everyone will think about their benefits or services or realize their monetary or social value. In addition, your employees may not realize they have access to certain benefits, such as training opportunities or discounted gym memberships. Creating awareness can help ensure workers don’t miss out on benefits or opportunities that may be useful to them.
Consider sending annual reports to describe their current compensation statuses, broken down, in detail. You may also consider implementing an employee portal to your HR system, so your workers can view their compensation information at any time as a way to increase transparency and employee insights. In addition, make your HR professionals available to explain the compensation plan to employees.
Making compensation predictable and your compensation plan easy to understand from an outsider observer’s standpoint can ensure that your employees understand the full value of their perks and benefits.