Total compensation includes all the benefits you provide your employees, not just their salaries. Health insurance, life insurance, disability insurance, retirement plans, workplace wellness plans, and other benefits all have a dollar value, even if it’s not immediately apparent to employees. The sum of all these benefits equates to total compensation, and employees could be receiving two or three times their base salaries in additional benefits.
When you spend that much money on your employees, you want to make sure you’re getting the highest possible return on your investment. That’s why companies are changing the way they think about compensation to get their money’s worth. Here are some reasons why you need to think about total compensation differently.
It Should Complement Your Company’s Goals
Some companies don’t put a lot of thought into their compensation plans. They offer similar benefits to their competitors. This is a missed opportunity, since a well-designed compensation package can help your company meet its strategic goals.
Before you make any changes to your compensation plan, revisit the strategic goals you have for your company. Do you want to increase sales? Do you want to become known for customer service? Do you want to reduce your expenses? Through your compensation strategy, you can encourage employees to work towards your goals and get your company where you want it to be.
For example, if your goal is to increase sales, your compensation plan should reward activities that will lead to that result. Your bonus structure should reward employees who’ve performed activities like finding the most qualified leads or closing the most sales. This compensation will encourage employees to focus on the activities that will help your business succeed.
It Should Be Well-Communicated
Do your employees know how much their total compensation is worth? At many companies, the answer is no. When employees think that their salaries are their only compensation, they may feel underpaid or underappreciated. This can contribute to morale problems at your company, and employees may look for higher salaries elsewhere. This situation is frustrating for business owners, since they know how much employees are truly being compensated.
To avoid these problems, companies need to make sure their total compensation plans are well-communicated. When you talk about compensation, always talk about total compensation, not just salary. This should start right at the offer stage with new employees, and employees should be reminded of their compensation regularly.
Total compensation statements are an easy way to let your employees know how much their compensation is really worth. These statements list the benefits employees receive, like health benefits and bonuses, and the dollar values of each. Your employees may be surprised when they see how much they’re worth to your company.
It Should Be Considered an Investment
Companies used to view compensation as a cost, but now, many companies are starting to look at compensation as an investment. After all, you’re investing in the success of your employees and the future of your business. Like any other investment, you need to calculate the ROI to make sure your investment is paying off.
There are many ways to calculate the ROI of a compensation package. The measures will vary, depending on your business and its goals. Think back to your business’s strategic goals, and choose measures that are appropriate for your situation. For example, if your main goal is to increase sales, you might want to track measures like your bottom-line results. If your main goal is to be known for customer service, you might want to use customer satisfaction surveys to see if your compensation plan is having the intended effect.