How to write a total compensation statement

Salary transparency goes beyond simply sharing salary ranges with potential job applicants. This includes showing employees how they will be rewarded for their work, experts told HR Dive.

To that end, employers use total compensation statements—or total compensation—to paint the big picture when it comes to showing workers how they get paid, beyond just base pay.

These statements can be beneficial in terms of employee engagement, talent attraction and retention, said Bob O’Hara, associate of Epstein Becker Green. They show that employers are committed to pay transparency and inform employees about how they are actually being paid. “If you’re really trying to be transparent with your employees, write down the big numbers to show that that’s the overall value proposition for us to have you on our workforce. I don’t think there’s anything wrong with that,” he said.

But the statements must also be made correctly, contain the right information, and be delivered by managers who are trained to answer questions.

Compensation statements show a past and future path

According to Martine Lellis, chief talent and administrative officer at wealth management firm Mercer Advisors, a total compensation statement should include four elements: base salary, incentives (which may include performance), equity, and benefit package value.

Regularly submitted Total Compensation Statements can also show employees their progress within the organization and a potential path forward; They can “help an employee understand their journey and history with the organization and also what their potential opportunities are for the future,” she said.

Not only do these statements give workers a more complete picture, but employers are committed to their workers by being transparent. According to a 2017 Payscale survey, employee attitudes toward a company’s pay philosophy and process had a 5.4x greater impact on satisfaction than pay itself. The same survey also found that nearly 90% of respondents who felt they were being paid below market were paid at or above.

Total pay statements can help combat that feeling of underpayment, Lellis said, especially among younger employees. This cohort tends to “get fixated on base pay and often just base pay because it’s on their regular paycheck and they’re supporting their families,” she said. That can often lead to last-minute decisions “when there really is so much more that goes into a full compensation package.” Younger employees may also be more open to sharing salary information with colleagues, so providing these statements can give them a better idea of ​​why factors like performance or education might mean different compensation packages.

The right numbers, delivered right

For total compensation statements to be effective, they must first be accurate, the sources said. It makes sense to include things like the value of insurance benefits, stock options, paid vacation time, and cell phone service. Flipping the couch cushions for every single potential penny of benefit doesn’t do it.

“You can’t go overboard and take free coffee and count that as an overall reward,” O’Hara said; This might seem like a bit of a quibble, but adding too many perks that aren’t actually part of the compensation can expose companies to fraud allegations and lawsuits.

And not every employee will see every benefit in the same way. “You have to be careful when you’re touting a benefit that you’ve packaged into a package around the world because someone can say, ‘I don’t use that,'” Lellis said.

That doesn’t mean a company won’t list parking discounts in a statement, but managers need training on how to provide and discuss those statements, Lellis said — and right now, most aren’t. According to Salary.com’s 2021 survey results, 74% of HR professionals surveyed said their company didn’t train managers to talk to employees about how their pay was determined.

“We don’t want managers going into these conversations unarmed with questions about how to communicate and go through compensation statements, how to address common questions and when to escalate,” Lellis explained to someone more experienced.

For example, someone who walks to work but sees discounted parking on their compensation statement might feel they are being lied to or cheated on. But a manager can communicate that “if the employer says we’ll provide that to you, even if you don’t choose it, there’s still value,” she said, pointing out that it will benefit other employees and could be useful if that worker is no longer able or willing to walk to work in the future.

That way, she said, a manager could suggest that the employee who walks to work consider a parking discount as part of what the company is doing to accommodate the wider employee community.