If you are a business owner, your gut reaction to the estimation of the employee’s total paycheck might be, “Way too much.” All kidding aside, total compensation is most likely one of the largest items on your balance sheet. Educating employees and management as to what those costs entail is crucial to your recruitment and retention efforts and allows you to make better business decisions.
We saw an ad that offered a starting wage of $24 per hour. When you dug a bit deeper, that was the total hourly compensation, including benefits. That made the $24 much less attractive. How do you compare? Run a total compensation report. I bet you will be astonished if you haven’t looked before. For some industries, the amount of non-wage compensation adds 30-50 percent to the cost depending on worker’s comp requirements and costs.
Once you know your numbers, get your employees engaged in a conversation. When you are transparent with your compensation reports, and you have a great compensation package, an amazing thing happens. Employees feel valued. Their first reaction will probably be, “Wow!” Next, they begin to think, “In order to increase my value, I need to demonstrate ‘x’ to my company.” Improved performance will pay dividends.
Evaluating your total compensation
Wage - Employees typically focus on wage as a judgment of their worth. Is the salary you offer commensurate with other like jobs and companies? How do you know? Wage and hour surveys by industry are available through a paid service and often industry associations themselves can provide that level of detail via an annual survey of membership. These give you a benchmark for pay scale range. Low rankings should encourage moving up to be competitive in the market.
Benefits - These range from tangible (e.g., healthcare, mileage, holiday parties, etc.), to intangible (e.g., paid time off, flexible hours). The “why” of The Applied Companies is to create a great place to work. The cost of that is not cheap. We are aware of several companies that canceled their group health insurance due to the Affordable Care Ace (ACA), not replace it, and thought that they would pay the 2 percent penalty and that would save significant money versus offering the benefit. Not in the long run. Remember spend money to make money. “A” candidates require health insurance to recruit them away from a competitor, and stay when a competitor entices them to leave.
Engagement equals increased employee satisfaction. Offering a valued compensation package and then making sure you let people know how amazing it is a sound HR strategy.
Jim Annis is president/CEO of The Applied Companies, which provide HR solutions for today’s workplace. Celeste Johnson and Tom Miller, Applied’s division directors, contributed to this article.