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The_Difference_between_Base_Salary_&_Total_Compensation.jpgBase salary refers to the fixed amount of money you pay your employees in their bi-weekly paycheques. Your employees may think their base salaries are their entire compensation, but that’s not the case. Many other types of compensation, both monetary and non-monetary, are also paid to employees. Total compensation refers to employees’ base salaries plus all their other types of compensation.

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What’s Included in Total Compensation

Base salary is just one part of your employees’ compensation. Additional monetary rewards, like overtime pay, bonuses, and commissions, are also part of it. Paid time off, like vacation days, sick days, or personal days are also valuable types of compensation.

If you offer a benefits plan, that’s also part of employees’ total rewards. These plans are valuable for employees, and as you know, they can be expensive for employers. Health and dental insurance, life insurance, short- and long-term disability insurance, and other components of your benefits plan are all parts of employees’ compensation.

Contributions you make to employees’ retirement plans are also compensation. These contributions can be made to group registered retirement savings plans (GRRSPs), deferred profit sharing plans (DPSPs), registered pension plans (RPPs), or another similar plan.

Some companies offer more unusual types of compensation. Paid training courses, tuition assistance, relocation assistance, wellness programs, or other benefits also fall under the umbrella of total compensation. Don’t forget about gifts like tickets and meals.

The Importance of Total Compensation

As a business owner, you know exactly how much you’re spending on various types of compensation for your employees. You’re the one who has to pay the bills for insurance premiums, paid courses, and other types of rewards. Your employees don’t have access to this information. They may know they have access to certain types of rewards, but it’s hard to guess how much those rewards are worth. Base salary, on the other hand, is very easy for employees to see. They just need to look at their paycheque to see what it’s worth.

By discussing total compensation with your employees, you can show them how much they’re really being paid by your company. Employees who may have thought they were being underpaid will see that’s not the case. Seeing their true compensation could help improve morale. As you know, employees with good morale are more productive. Visibility to compensation could also prevent employees from looking for new jobs. Once employees see they’re well-paid, they could decide to stay with your company, which reduces your turnover and saves you both time and money.

Communicating Total Compensation to Employees

How can you show your employees how much their compensation is worth? It’s much easier than you might think. You don’t need to pull out your calculator and start adding up employees’ various rewards. With your human resource information system (HRIS), you can quickly create individualized total rewards statements for your employees. These statements show employees a breakdown of all the types of compensation they’re receiving, as well as a dollar value for each.

You can provide these statements to each of your employees and answer any questions they may have. When compensation changes, meet with your employees again to ensure they understand. For example, you could do this when you make a change to the benefits plan or when employees receive raises.

For employees, base salary is the most visible part of compensation, but it’s far from the only part. Many other forms of compensation are also paid to employees, and all together, they make up total compensation. To show your employees how much you’re really paying them, use your HRIS to create total rewards statements.


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Mitzi Sorokolit

Mitzi joined the insurance industry in 1988 with Empire Life working on individual life and disability products. From there, she moved to Laurentian Financial as an executive assistant to the VP of sales. ITT Hartford was her next move, where she joined the specialty markets team that at the time was focusing on high net worth individual life and pre-arranged funeral products. She spent a few years self-employed working for brokers as back office support for individual life polices and retirement compensation arrangements. Mitzi joined Clover Insurance in 1999, where she handled life sales and moved to group benefits in 2004. She joined GroupQuest in 2006 as a marketing assistant and has worked her way up as the company grew. Mitzi is married to Jeff and they have a son, Christopher. She has a love of football, enjoys spending time up north, and takes any opportunity to travel.