A MUST for 2013!
Although recruiting quality employees is of upmost importance to a company’s overall strategy, retaining employees is also equally as critical. One of the common reasons that employees report as the reason for leaving their current employer is for an increase in compensation. Once the employee has made the decision to leave, it is almost too late for you to do anything about it. It is frustrating and difficult to convince that employee not to leave because their perception is that compensation will be increased however they are likely only to be considering their salary into this equation. What employees tend to forget are the other components that comprise their TOTAL COMPENSATION.
An effective HR strategy is to communicate total compensation to their employees effectively. This effort will help to hedge turnover for employees that may considering jumping ship for a better deal as well as improve the overall morale of the employee population. The reality is that employees don’t pay much attention to how much their employers are paying out for employee benefits, the second biggest expense behind their salary. They tend to only notice when their premiums increase. The TOTAL cost of their insurance premiums might only catch their attention AFTER they have left the company and see the COBRA rates that are offered to them.
One solution for educating employees is by providing Total Compensation Statements. Sending these statements are seen as a best practice and becoming increasingly more widespread even with smaller employers. The statement serve as means to communicate the contributions above and beyond wages employers make to employees. These expenses include health insurance premium contributions, health savings accounts or FSA contributions, Life Insurance, STD/LTD, PTO, 401(k) matching, stock options, auto allowances, tuition reimbursement, and even employer paid taxes.
The reason Total Compensation Statements are gaining popularity is largely due to the advancements in HR Technology. Many newer payroll systems are integrated with robust HRIS systems. It makes it easier for employers to compile this data because the information is all contained within one system as opposed to multiple spreadsheets or paper files. In fact, many HRIS systems can support dynamic total compensation statements that update with each processed payroll. If an employer utilizes a self-service approach, employees can see this statement in real time with the most updated compensation information.
Total Compensation Statements serve as a powerful retention tool for employees to understand the true worth of their employment. This is especially true for lower compensated employees who may leave an employer for a few thousand more dollars elsewhere. It can benefit highly compensated populations if vesting schedules for retirement benefits or stock options are included and easily communicated as well. Many employers try to communicate this information to employees at least once a year, either at the employee’s annual performance review or during open enrollment. If an employer can save a few employees from turning over each year and help the overall population to feel more valued by providing Total Compensation Statements, it is well worth the cost of doing it.