Beyond Salary: How Showing Employees Total Compensation Can Boost Your Business
Have you ever had an employee who frequently asked for raises, despite regular salary reviews? Or perhaps you've noticed team members feeling undervalued, even though your compensation budget is substantial. Often, the issue isn't your compensation itself—it's how you're communicating it. Transparently sharing the full picture of total compensation can significantly boost employee retention, satisfaction, and your overall business performance.
What Exactly is Total Compensation?
Total compensation isn't limited to just a paycheck, it includes everything your business provides financially to employees. It covers direct compensation (base salary, overtime, bonuses), indirect compensation (insurance, retirement contributions, payroll taxes), and additional perks (training opportunities, wellness programs, profit-sharing plans). Put simply, total compensation shows employees the full financial investment your company makes in them.
When employees can see the entire package, they begin to truly understand and appreciate the comprehensive value your organization places on their well-being and professional growth.
Why Communicating Total Compensation Matters
Employees often underestimate their true compensation because they only see the net amount of their paycheck being deposited into their bank account. They tend to forget about all the additional benefits they receive by working at your company. By transparently sharing the full amount of their compensation, you help employees recognize the broader financial commitment your business is making toward their future and welfare.
Clear communication builds trust on both sides, the employer and the employee. Employees who understand their total compensation feel more valued, secure, and motivated. Additionally, clearly understanding total compensation helps business leaders grasp actual employment costs, allowing for better financial planning and more informed decisions.
How to Do It: Illustrate the Total Compensation Pay Journey
One of the most effective ways to clearly communicate total compensation is by illustrating the employee’s pay journey throughout their time with your company. This visual representation includes their historical total compensation, current pay package, and future projected compensation. Presenting compensation this way provides clarity and tangible evidence of your investment in employees and their journey of compensation growth while they have been with the company.
Benefits of illustrating the pay journey include:
Boosted Retention: Employees feel secure and loyal when they see consistent growth in their compensation over time.
Reduced Frequency of Raise Requests: Understanding past raises and future compensation potential helps manage employee expectations, reducing frequent raise requests.
Enhanced Employee Satisfaction: Employees clearly see their value and your ongoing commitment to their career and financial growth.
Regularly sharing and reviewing this information during annual reviews or performance discussions reinforces employee satisfaction, strengthens loyalty, and significantly improves overall retention.
Boost Retention by Showing Employees the Full Picture
Clearly showing employees their total compensation can greatly improve retention. When employees fully understand and appreciate what they receive beyond their base salary, they are less likely to look for opportunities elsewhere. Businesses that communicate total compensation effectively often experience lower turnover rates.
Retaining employees is crucial, particularly in competitive industries where losing a valued team member can cost significantly more in recruitment, onboarding, and lost productivity. Regularly emphasizing the full value of employment helps your business reduce turnover and manage associated costs more effectively.
Increase Employee Satisfaction and Reduce Frequency of Raise Requests
Employees who fully understand their total compensation tend to feel genuinely appreciated. Regularly communicating the full picture of their compensation reduces the frequency of raise requests, as employees develop a clearer appreciation for the substantial benefits they already receive.
Regular total compensation statements or reviews can also boost morale, enhance motivation, and strengthen employees' connection to your company.
Best Practices for Clearly Communicating Total Compensation
Clearly communicating total compensation doesn't have to be complicated, but it does need consistency and clarity:
Regular Updates: Consistently share total compensation details, ideally annually or bi-annually.
Clear and Simple Presentation: Break down each compensation element clearly, avoiding technical jargon.
Accuracy and Reliability: Regularly review and confirm your compensation-related data to maintain accuracy, clarity, and employee trust.
Quick List: Some Items to Potentially Include in Your Total Compensation Calculation
Here is a quick list of items to consider including in your total compensation calculation. This is designed to jog your memory as you think through all of the benefits you offer employees and is not a complete list.
Base Salary
Overtime Pay
Bonuses and Commissions
Employer Payroll Taxes (Social Security, Medicare, unemployment taxes)
Health Insurance Premiums
Health Savings Account Benefits
Retirement Contributions (401(k), pension plans)
Life and Disability Insurance
Paid Time Off (Vacation, Sick leave, Personal days)
Educational Assistance (Tuition reimbursement, Student Loan Reimbursement, training courses, professional development)
Wellness Programs (Gym memberships, health screenings)
Employee Discounts
Profit-Sharing Plans and Stock Options
Remote Work or Flex-time Benefits
Take Action Now
Clearly communicating total compensation isn't just good practice—it's essential for cultivating a loyal, satisfied, and productive workforce. By proactively clarifying the financial investment your business makes in its employees, you position your company as transparent, caring, and committed to your employees.
If you need help changing your employees' perceptions and clearly communicating their compensation, contact us here.