02 Oct The Value of Total Compensation Market Analysis
Executives these days are placing a greater emphasis on total compensation rather than just compensation and benefits in their own silos. They see the overall impact of the entire labor cost on the bottom line and want to look at it as a package.
Employee benefits costs continue to grow and benefits are now a bigger part of the overall executive and employee pay package. Many employers mistakenly believe that looking at the relative cost of the health care benefit and the overall level of base pay and bonus will tell the whole story. At Compensation Works, however, we are finding that many employers have other employee benefits that add up to a significant value and that is sometimes being missed.
Total Compensation Analysis – A true total compensation analysis incorporates every form of pay and benefits employees receive including base pay, bonuses or stipends if used, equity such as stock options, restricted stock, health care, paid time off, holidays, retirement programs, sabbaticals, transportation subsidies, short-term disability, long-term disability, and any other beneficial program that the organization pays for.
A lot of employers tell their staff that they “have a rich benefit program”. However, it’s much more compelling when staff hear ““our benefits are 18% higher than others” and “we pay $13k per employee more for benefits than similar employers.
Communication – A full analysis that shows the market position for pay as well as benefits is the only way to communicate the nominal value of the total compensation program. Research shows that employees have greater pay satisfaction when the have more pay communication. There is more pay transparency than ever before with Glassdoor, Salary.com and other sites.
Culture and Other Deal Elements – No analysis can account for the intrinsic value of organizational culture, potential career advancement, job security, talented co-workers, pleasant working conditions as the value of these are in the eye of the beholder. Each individual will place a different value on these elements.
However, even the best culture and most talented co-workers won’t help you attract new talent if your pay is significantly off the market. Usually when the total compensation package drops about 10% below the market average, employers start having a tougher time with recruiting and retention.
Take Action – In this hot labor market, it’s important to look at both sides of your compensation program. Compensation Works has a great tool that allows us to estimate the percentile of your organization’s compensation package compared to others. Let us know if we can be of help!