With the advent of new tech solutions, job requirements, objectives and roles are changing for good. Job applicants gravitate towards employers that offer competitive salaries and benefits. After all, benefits are just as important as specific job desires and responsibilities. It might be time to tie all of this together.
35% of employees say an expanded benefits package would help them stay at their jobs. 50% of HR also believes supplemental insurance improves recruiting efforts. It’s obvious that better benefits can help with the war for talent.
This is where the total reward statement comes into the picture. It has become an effective way for employers to add more value to their job offers, with more and more companies incorporating a document within their job offer letter.
What is a Total Reward Statement?
A total reward, or total compensation statement, refers to a document that highlights an employee's benefits options on top of their basic salary. Its purpose is to shed light on what exactly they can expect from their employers in all forms of compensation.
This brings transparency and shows the value of the employee to the company. It often breaks down everything into a dollar amount, from basic salary, to more complex L&D programs. Then, it typically displays the information via more intuitive charts and graphs. So, when workers have visual confirmation that the company is willing to invest in their career, it lowers the turnover and retains the top talent.
Outlining a list of benefits and costs can make all the difference. A total reward statement ultimately paints a bigger picture for employees.
From an employer's perspective, a total compensation statement consists of monetary costs that cover different aspects of what they earn. Typically, it includes a base salary and additional financial perks in the form of commissions or bonuses.
In addition, total reward statements will encompass the entire benefits package. This can include health, dental, life, disability and vision insurance. The information is displayed as the company covered portions of insurance premiums, paid time off, 401(k) contributions and Social Security contributions.
When broken down, it usually comprises two parts, direct and indirect compensation. Direct compensation includes base wages, overtime, bonuses, commission, and incentive pay. Indirect compensation covers unemployment tax, social security tax, and workers’ compensation insurance. This also covers life, dental, vision, and disability insurance. It should even highlight other niche areas like relocation expenses, education support, 401(k) retirement contributions, accrued PTO and health saving account.
Why Job Offers?
Although employers have no legal requirement to provide this in a job offer, it does provide many benefits. First, the value breakdown helps candidates understand exactly what they will be receiving, down to the dollar amount. This makes it easy to compare to other jobs they may be considering. By demonstrating all forms of compensation, it also makes a job more appealing than those that don’t offer this. Therefore, most HR professionals view the total reward statement as a resourceful recruitment tool.
According to PayScale’s 2022 Compensation report, over 55% of top performing firms provide a total compensation statement to their employees. It is beginning to become standard practice at many large organizations.
How Should Your Offer be Structured?
In a job offer letter, you should break down the previously mentioned indirect and direct compensation elements to the employee. In fact, organizations who are upfront right from the start have a better chance to hire and retain their workforce.
Although you may vary by company, it is crucial to structure your job offer accordingly. It should begin with offerings that are utilized first. The most important part would be the base salary. Then, move into signing bonuses and relocation reimbursements, as those are distributed near the beginning. Add bonuses and commissions as well.
Now, move on to the indirect compensation. Add paid time off, vacation period, volunteer hours, and professional development costs. If benefits don’t pick up until the beginning of the month, or after a certain amount of time, note that as well.
If this is a little confusing, consider this: anything you’re offering new hires should make it to the total compensation statement. Experienced HR professionals now view a total reward statement as an opportunity to garner the attention of new hires and retain their value for the company. If you’re worried about overselling the compensation, organize and structure the reward statement so that it comes across as reliable and viable to the employees.
Use It After the Hire Too
At least once a year, make it a priority to offer a total compensation statement to your workforce. This serves as a continuous reminder. It allows employees to clearly understand all perks and additional dollars the company is investing on top of the paycheck.
Some companies offer this at the beginning of the year to help their workers know what to look forward to. Other times, it can be utilized to great effect during open enrollment, helping everyone better understand the exact value of their benefits.
Recently, a total reward statement has become an effective tool for companies to retain top talent and dissuade employees from jumping into the Great Resignation rabbit hole. As employees leave their jobs in record high numbers, employers can use a total compensation statement to communicate the value and care through benefits. It also puts employers in the positive light that they’re opening doors of health insurance, educational assistance and retirement contributions for the employees.
Since the pandemic, the economic outlook has become more uncertain. So, it has become integral for businesses to focus on the right strategies to attain and retain talented employees for a long time. In a saturated job marketplace, HR professionals must be strategic and systematic about their recruitment process.
But before the job market recovers, the burden of responsibility falls on companies to make the right choices. Employers are aware of the changing dynamics in the job market. HR professionals and business leaders now make proactive efforts to attain and retain employees. In hindsight, it makes perfect sense for employers to provide an off-cycle total compensation statement to demonstrate the full extent of benefits.