Total compensation refers to the cash wages that an employee earns, combined with any non-cash benefits that are paid by the employer on behalf of the employee. This means that it embodies all monetary payment for the employees, including any incentives and bonuses as well. Additionally, the non-cash benefits include incentives from employers such as holiday pay, life insurance, vacation time, health insurance and more.
It is vital to understand the meaning of total compensation. This allows for the employee to put into perspective the advantages of staying at a particular job. In many instances, the non-cash benefits that are available are not immediately visible to the employee and their value underestimated. However, these supplementary earnings incredibly boost any base salary.
Compensation specialists can adequately communicate to employees the differences between their base pay and total compensation. Ideally, this is something that should be revealed to the employee when they are going through the recruitment process. Total compensation may be a deciding factor for a skilled worker seeking to join a progressive organisation. Only the employees who are salaried or exempt receive base pay, as opposed to an hourly rate. The base pay is different from what the employees take home. It includes the amount that will later be deducted and paid as tax.
Employees need to be able to track their total compensation, which is where a total compensation statement comes in. This statement will indicate all the benefits that the employee receives as well as when and how they are to receive them. With this information, the employee shall become clear on everything that they are receiving in addition to their base pay. It can effectively motivate an employee by revealing the value of working for a particular employer. Employers will typically issue a total compensation statement on an annual basis when carrying out performance reviews or appraisals.
Small companies maintain easy to understand compensation plans due to a limited workforce. Larger companies can offer more benefits, and therefore, their compensation processes and systems tend to be much more complicated. Sales compensation specialists provide professional services that demystify all types of total compensation plans. Furthermore, these specialists will know how to use total compensation for motivation and retention of the best talent within the company. Excellent compensation will also attract top talent from the whole industry.
Compensation professional organisations are responsible for having certified benefits professionals. They can be another option for any company seeking compensation process solutions. As part of their mandate, they can review evaluation systems as well, for fair and unbiased incentivisation and rewarding within the company. They have certified professionals who are able to tie in work performance and employee motivation with a value proposition for effective performance and results.
Companies can make use of total compensation to elevate their reputations within their industries. Furthermore, for employees seeking to build their careers, explaining the total compensation will let them know what they can expect with certain behaviours and productivity.
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