Industry News

What Is a Total Compensation Statement?

June 21, 2020

Most employees' total compensation includes more than their base pay — and paystubs do not show the full picture. To promote transparency and engagement, some employers provide employees with total compensation statements. Also called a total rewards statement, a total compensation statement is an annual document that reflects the total amount the employee receives for service to the company. It tells the whole story about the pay package by including both direct and indirect compensation.

Most employees’ total compensation includes more than their base pay — and paystubs do not show the full picture. To promote transparency and engagement, some employers provide employees with total compensation statements.

Also called a total rewards statement, a total compensation statement is an annual document that reflects the total amount the employee receives for service to the company. It tells the whole story about the pay package by including both direct and indirect compensation.

What goes on a total compensation statement?

Below are items commonly found on total compensation statements:

  • Base pay (hourly rate or salary).
  • Bonuses.
  • Value of paid leave, such as paid vacation, sick, personal and bereavement time.
  • Employer share of insurance premiums, such as medical, dental, vision, life and disability insurance.
  • Employer contributions to flexible spending accounts.
  • Employer contributions to 401(k) plan.
  • Stock options.
  • Amount allocated to employees for Employee Assistance Program services.
  • Mandatory benefits, such as unemployment insurance, workers’ compensation and Social Security.
  • Tuition assistance.
  • Adoption assistance.
  • Charitable donation match.
  • Learning, development and career advancement opportunities.
  • Relocation expenses.
  • Company vehicle.
  • Cell phone service.
  • Mileage reimbursement.
  • Gym membership.
  • Employer-paid lunches.
  • Commuter and parking benefits.

We could go on and on. The point of the statement is to communicate your total investment in the employee, so the more details you provide, the more valuable the statement.

 

How popular is this practice?

According to PayScale’s 2018 Compensation Best Practices Report, 36% of employers provide total compensation statements to their employees. The report also concluded that top-performing companies and enterprise organizations are more likely to provide the statement.

 

How do total compensation statements improve transparency and engagement?

The statement helps employees realize the value of their pay package. It gives them tangible proof of the extent of your commitment to them, which can in turn boost their loyalty to the company. Also, if they need clarification on their total rewards, they can refer to the statement.

 

Are there downsides to providing total compensation statements?

Per an article published by HR Dive, some employers do not provide total compensation statements because they “worry that employees will be dissatisfied with the information in the statements, or will compare their benefits to those of co-workers and others in similar jobs in the market.”

Employers can likely overcome this downside by encouraging employees to air any worries they have with the statement and being ready and willing to address these concerns.

Another reason some employers do not share total compensation statements is that they fear making mistakes. If the statement is inaccurate, it can reduce trust in the employer. Therefore, employers must be very careful when preparing the statements.

Some industry experts believe the benefits outweigh the risks. But given that there are risks, employers should seek expert advice before deciding to share total compensation statements.

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