Many employees evaluate their compensation based on their salary level, and tend to forget about the cost of the added benefits they receive, but making them aware of their “total compensation” can help them see the full picture. Their total compensation includes their salary, plus the costs of benefits, etc.
The U.S. Department of Labor’s Bureau of Labor Statistics (BLS) reports that the cost of employee benefits adds approximately 32% to the average worker’s salary. Clearly, benefits are not on the fringe anymore, and your employees should see how much you value their work by showing them not only their salary compensation but their total compensation.
To communicate this value better to your employees, give each employee or prospective employee a written report of their total compensation package. With current employees, do it as part of their annual review or at the beginning of each fiscal year. This may be a determining factor in attracting new talent, as well as keeping your valuable employees from looking elsewhere based solely on the promise of a higher salary.
Following are categories of benefits that you should include in this report.
The largest category of benefits is insurance, estimated by the BLS at about 8% of the total package, most of which is health insurance. Included in this mix are dental, vision, long-term disability, life, and accidental death insurance.
Most people don’t think of taxes as being a benefit, but the payroll taxes you are legally required to pay actually do benefit your employees. Employees need to understand what employers pay on their behalf including employer taxes because it helps them appreciate what an employer invests in each employee. These taxes include the company’s required portion of Social Security and Medicare taxes, and state and federal unemployment taxes. The BLS estimates that these taxes account for approximately 7.5% of total compensation.
The third largest category, coming in at about 7%, is paid leave, including sick pay, holidays, paid time off, and maternity or other family leave. The BLS reports that the average American worker receives a total of 25 paid days off per year (15 days PTO and 10 paid holidays).
Representing about 5-6% of the total compensation package, retirement benefits can be in the form of defined benefit, defined contribution, or even pensions. Many employers match the employee’s contributions, or at least offer a percentage based on how much the employee contributes.
This category includes bonuses and overtime pay, and is estimated by the BLS as contributing an average of about 3% to the overall package.
Other benefits may include dependent day care, healthcare flexible spending accounts, tuition reimbursement, adoption assistance, or pre-tax commuter benefits. If your company offers these, you should include them in your reports. Additionally, your company may offer unique benefits such as employee discounts, parties, travel expenses, or free special events.
Communicating These Benefits to Your Employees
Be sure your employees fully understand that these benefits are of significant value to them, over and above their salary or hourly pay. We can help you develop a template to communicate these benefits so if you need assistance creating reports and incorporating them into your employee communications, please reach out to us.