Total Compensation Statement: Showing Employees Their Value

As large and small businesses vie to attract and retain top talent to employ, promoting their culture, career development, and social responsibility initiatives is a common strategy.

Yet, despite these critical aspects, there is an overlooked tool that savvy companies can use to highlight the value of working for their organization: the total compensation statement.

Let’s get more into it! 📣

A total compensation statement is a kind of all-encompassing document outlining every component of employee compensation.

It details direct payments such as salary and bonuses, including elements such as:

• pension contributions,
• health insurance,
• performance bonuses, annual bonuses, profit-sharing plans,
• stocks options, restricted stocks units, or other equity-based incentives,
• Additional perks,

• and other kinds of benefits and perks typical of UK employment standards.

A total compensation statement offers an item-level view of each category of compensation, giving employees a deeper understanding of the total value they receive through their employment.

These terms are often used interchangeably, but they represent significantly different concepts in the realm of human resources and payroll.

Salary refers to the fixed amount of money that an employee receives on a regular basis for performing their job.

It is typically expressed as an annual figure but is typically paid out in monthly or biweekly instalments.

💡 Salary does not include:

• any additional bonuses,
• benefits,
• or overtime pay,

making it a straightforward and predictable figure that constitutes the core payment an employee earns.

👉 The total compensation, on the other hand, encompasses all forms of financial rewards and benefits received by an employee, including salary. It is a broader concept, more comprehensive.

A total compensation statement is beneficial during pivotal HR interactions with staff.

During annual appraisals, presenting a total compensation statement can help emphasise the financial benefit of working with your firm.

Another practical situation to present a total compensation statement is during promotions or role changes in the organization.

👉 The document can be used to outline each item, using columns and tables, the kinds of rewards associated with an employee's new role or responsibilities.

A total compensation statement can also prove invaluable during recruitment efforts by furnishing a comprehensive picture of the salary and benefits available to potential hires.

By highlighting a complete picture of your compensation package, smart employers can gain a competitive edge over those focusing solely on basic salary.

It is the net earnings after:

• taxes,
• insurance,
• and other deductions constitute direct cash compensation to staff.

This portion of their compensation is received during specified payment periods or as the result of a particular circumstance, such as a bonus or incentive.

A salary, or hourly wage, is the base of an employee's earnings.

It is paid directly to employees, typically via:

• cheque,
• direct deposit,
• or occasionally in cash.

Many employees place a greater emphasis on their basic salary than on other compensation components.

💡 A total compensation statement can raise employee awareness, appreciation of other important components, and improve their job satisfaction.

These cash payments are performance-related and represent awards for meeting individual or company goals.

Commissions are most commonly associated with sales positions, with compensation based on a percentage of closed sales or deal value.

Special incentives revolve around:

• specific sales goals,
• volume,
• or piecework.

Pension contributions, accessed upon retirement, are a key element of monetary compensation.

💡 Auto-enrolment pensions require employers to automatically enrol eligible workers into a pension scheme and contribute at least 3% of their earnings. This initiative enhances retirement savings and ensures employees systematically save for their future.

These forms of compensation allow employees to purchase company stock at a set price, potentially below market value.

The opportunity to purchase stock can significantly enhance the compensation value for eligible employees.

👉 These stock awards align employee and shareholder interests, encouraging long-term commitment and potentially substantial financial gain in stock price appreciation.

Working Time Regulations regulate overtime pay.

These regulations prevent staff from working more than 48 hours per week unless they voluntarily opt out.

💡 While not mandated, overtime pay rates are often compensated at time-and-a-half or double time, particularly during holidays or weekends.

In the UK, employees receive statutory leave, which includes at least 28 days of paid holiday per year (including public holidays), maternity/paternity leave, and sick leave.

Many firms offer additional leave benefits to further enhance the work-life balance of their staff.

Employee benefits vary widely, ranging from health insurance to perks and experiences.

Despite their non-cash status, many of these benefits represent significant value on a total compensation statement.

Your total compensation statement should highlight the tangible value these benefits offer employees beyond direct monetary compensation.

While the UK offers comprehensive health care through the NHS, many employers provide supplemental private health insurance as part of their benefits package.

This additional coverage, considered vital compensation, often includes:

• faster access to specialists,
• private rooms,
• and elective treatments unavailable through the NHS.

Many employers include life insurance coverage, offering a lump sum to the employee's beneficiaries in the event of their death.

Disability coverage is also common, providing financial support when an employee is unable to work due to illness or injury.

Additionally, statutory sick pay is included, ensuring employees receive a portion of their salary during extended absences.

Some employers offer reimbursements or compensation for commuting expenses, such as public transportation fares and parking fees. These benefits may also include the full-time use of company vehicles.

Such benefits are designed to ease the financial burden of commuting and can significantly enhance the attractiveness of a compensation package.

This benefit includes options such as on-site childcare facilities and financial subsidies to help offset private childcare costs.

This compensation is significant to working parents, making balancing family and work commitments easier while enhancing job satisfaction and loyalty.

These programmes often include:

• gym memberships,
• fitness classes,
• or wellness stipends that support employees' physical and mental health.

By promoting regular exercise and overall well-being, wellness programmes improve workplace morale, reduce healthcare costs, and increase productivity.

These non-cash benefits add value for staff through various personal and professional experiences.

Forward-thinking organizations invest in their staff's training and development.

These investments may include:

• university tuition reimbursement,
• industry certifications,
• or memberships in trade and professional groups.

Training and development contribute to personal and professional growth and offer employees valuable skills to the organization.

Discounts, memberships, and access to recreational facilities enhance employees' personal lives and leisure time.

They offer enjoyable activities at reduced costs or free of charge, contributing to a more satisfying work-life balance and fostering a positive culture.

Support services for employees dealing with personal issues, ranging from mental health counselling to financial advising and legal services, are valuable benefits to many.

EAPs help employees manage life's challenges, improving their overall well-being and productivity at work.

Work-from-home options and flexible work hours promote work-life balance.

Those allow employees to adjust their working patterns to accommodate personal commitments and preferences, increasing job satisfaction and productivity.

Other unique perks, such as sabbaticals, are increasingly common.

These benefits promote a positive workplace culture and employee well-being, making them a significant part of non-monetary benefits in total compensation statements.

Some total compensation statements will outline employment taxes and other mandatory deductions.

These deductions typically include:

• Income Tax: Calculations are made on the employee's taxable income using rates set by the government.
• National Insurance Contributions (NICs) are mandatory payments in the UK that provide access to certain benefits, such as the state pension and unemployment benefits. Total compensation statements might include details on PAYE (Pay As You Earn) and National Insurance contributions. PAYE is the system through which income tax and National Insurance are deducted directly from wages, while National Insurance funds certain state benefits.
• Other Deductions: These amounts include student loan repayments, garnishments, or charitable donations, which affect employees' net take-home pay.

Employers must take these deductions for tax and other statutory contributions from an employee's gross salary.

💡 Highlighting, by category, the salary, benefits, and other employer-paid deductions item by item supplies an often unseen perspective of their total compensation. Together, they create a holistic view of the costs to employ workers, otherwise unrealised.

When establishing total employee compensation values, consider all the financial aspects of salary, bonuses, and benefits, including pension contributions and private health insurance. Add these to other non-monetary perks like training opportunities and additional leave to determine the complete compensation offered to employees.

To illustrate the variation in total compensation statements across different sectors in the UK, consider this anonymised example from an IT and a retail company. 🧐

A tech company might offer substantial equity options and bonuses, while a Retail firm might offer competitive bonuses based on sales targets and extensive staff discounts.

Each example shows how components can differ significantly, tailored to the industry's standards and roles to employ the most skilled people.

Employee Benefit

Health Insurance: £2,100 Private health insurance covering specialist treatments and private rooms

Life Insurance: Premium: £459 Lump sum equivalent to 2 years' salary.

Disability Coverage: £249 Covers 60% of salary during medical leave

Pension Contributions: £2,000 Employer contributes 5% of annual salary to pension

Paid Leave: 28 days plus 10 public holidays

Transportation Benefits: £600 towards public transport costs

Childcare Assistance: £1,000 towards childcare facilities

Wellness Programs: Gym membership worth £300 annually
    
Non-monetary Benefits

Training and Development: Access to annual training worth £500

Recreation and Leisure: Discounts at local recreation facilities

Employee Assistance Program: Access to counselling and legal services

Flexible Working Arrangements: Option to work remotely up to 2 days per week

Additional Perks: Annual sabbatical of one month after three years of service 

Tax and Deductions 

Income Tax: Deducted at source as per PAYE

National Insurance Contributions: Standard rate applied

Other Deductions: Student loan repayment (£1,200 annually) 

Total estimated monetary values: £50,200

Estimated non-monetary value: Valued at approximately £7,708 (based on benefits and perks)

Total compensation value (monetary + non-monetary): £57,908

Some tools, such as payroll software, can help you develop the perfect total compensation statement by helping you visualise and calculate all the components, in the UK for some, and all around the world for others!

🛠️ As an EOR and HRMS service, Remote manages all the payroll processes in more than 60 countries. Remote automatically calculates and tailors elements to local laws and work regulations for:

• Monetary and non-monetary benefits,
• salary,
• and other bonuses.

You always know what should be put in your total compensation statement and the amount you should pay, ensuring accurate and timely compensation for your staff! And if you still need assistance, experts are here to support you.

In summary, a total compensation statement enhances transparency and employee satisfaction.

By providing an item-level view of salary and benefits to employed staff, these statements fully inform employees of their benefits, fostering trust and loyalty towards their employer.

This kind of transparency in compensation is integral to modern HR practices, helping to align employee and organizational goals and ensuring a more motivated and committed workforce.