--- title: Why You Should Help Employees Understand Their Compensation Plan description: Creating a compensation plan is a vital part of your employee engagement. But do your employees know how they are compensated? image: https://www.backstitch.io/hubfs/Blog/Images/briefing-of-employees-J822NNJ.jpg --- [![backstitch purple logo](https://www.backstitch.io/hs-fs/hubfs/backstitch_logo_purple_2020.png?width=170&height=36&name=backstitch_logo_purple_2020.png "backstitch purple logo")](https://www.backstitch.io/) ## [Integrate Mental and Financial Wellness into Your Total Rewards](https://www.backstitch.io/blog/mental-wellness-total-rewards) [Read](https://www.backstitch.io/blog/mental-wellness-total-rewards) ## [Implement Flexible Benefits Allowances for Your Workforce](https://www.backstitch.io/blog/flexible-benefits-allowances) [Read](https://www.backstitch.io/blog/flexible-benefits-allowances) ## [Essential Skills and Tools that Every Total Rewards Professional Need](https://www.backstitch.io/blog/skills-and-tools-for-trs-professionals) [Read](https://www.backstitch.io/blog/skills-and-tools-for-trs-professionals) ## [AI and HR: Realistic Expectations for Automated Benefits Communication](https://www.backstitch.io/blog/ai-and-hr-realistic-expectations-for-automated-benefits-communication) [Read](https://www.backstitch.io/blog/ai-and-hr-realistic-expectations-for-automated-benefits-communication) ## [Open Enrollment in a Hybrid Workplace: Best Practices for Virtual Success](https://www.backstitch.io/blog/open-enrollment-in-a-hybrid-workplace-best-practices-for-virtual-success) [Read](https://www.backstitch.io/blog/open-enrollment-in-a-hybrid-workplace-best-practices-for-virtual-success) by [Sydnie Fultz](https://www.backstitch.io/blog/author/sydnie-fultz) on Feb 23, 2021 [Human Resources](https://www.backstitch.io/blog/topic/human-resources) [Employee Benefits](https://www.backstitch.io/blog/topic/employee-benefits) [Employee Engagement](https://www.backstitch.io/blog/topic/employee-engagement) [Total Rewards Statements](https://www.backstitch.io/blog/topic/total-rewards-statements) # Why You Should Help Employees Understand Their Compensation Plan ### Subscribe to Email Updates A true compensation plan provides more value to employees than just a mere salary. It provides them knowledge and peace of mind.  Employee compensation is made up of three elements: salary, benefits, and non-monetary compensation. While the first two elements are more widespread and straightforward, the last one might get overlooked by employees.  > [Curious? View Total Compensation Examples](https://www.backstitch.io/total-reward-statement-examples) Examples of these other forms of compensation include perks such as special discounts, transportation reimbursement or free meals. A compensation plan will highlight the value of these elements in a coherent manner. It must also be simple for employees to understand.  But why should your employees have a solid understanding of these three elements? Helping employees understand the three components that make up compensation will keep [employees happy.](https://smallbusiness.chron.com/excellent-salary-benefits-programs-make-employees-happy-36398.html) They will feel motivated to continue delivering good work, knowing that they are receiving a valuable compensation package. Additionally, a strong compensation package ensures internal pay equity, gives your business a competitive edge, and establishes transparency and fairness.  Below are a few more reasons why your business benefits from employees understanding their entire compensation plan. ## Drive Higher Retention Your HR team tailored a compensation package to increase employee retention. Why wouldn’t you want employees to have a thorough understanding of its value?  To ensure that your compensation plan works as a retention strategy, explain the details of the compensation plan to employees. If an employee has no idea what their compensation entails, then it will not be a factor influencing their loyalty.  Benefits are a rarity these days — whether your business offers unique or even standard benefits, make sure to show them off.  ## Improve Communications  Making an effort to go over an employee’s benefits plan establishes trust and helps create a [transparent](https://www.thebalancecareers.com/salary-transparency-1287067) work culture. Setting time aside to go over a compensation package shows employees that you do care. They will feel like an asset to your company rather than a disposable resource.  When employees feel like they are being treated fairly, they are more inclined to deliver valuable work. Show that you care about your employee by offering to walk them through their compensation package.  ## Streamline Recruitment Can employee compensation affect people who don’t work at your firm? If an employee has a good understanding of their compensation plan’s advantages, they will be more likely to boast about all of the great benefits offered at work. As a result, the employee may help streamline recruitment by [referring potential talent](https://business.linkedin.com/talent-solutions/blog/2015/08/5-reasons-employee-referrals-are-the-best-way-to-hire) within their network. Talent may also become intrigued about your company simply by word of mouth.  A total compensation plan doesn’t have to be another tedious task on an employer’s to-do list. An employee communications and engagement software program can help keep your employees well informed without much effort. ### [See how backstitch TRS can compile and explain all your compensation offerings](https://www.backstitch.io/trs) ### [Sydnie Fultz](https://www.backstitch.io/blog/author/sydnie-fultz) Creative Content Manager [![Schedule Demo](https://no-cache.hubspot.com/cta/default/731034/74a94641-0bbd-4435-ace2-a510a17e29cc.png)](https://cta-redirect.hubspot.com/cta/redirect/731034/74a94641-0bbd-4435-ace2-a510a17e29cc) [**](http://www.linkedin.com/shareArticle?mini=true&url=https%3A%2F%2Fwww.backstitch.io%2Fblog%2Fwhy-you-should-help-employees-understand-their-compensation-plan) [**](https://www.facebook.com/sharer/sharer.php?u=https%3A%2F%2Fwww.backstitch.io%2Fblog%2Fwhy-you-should-help-employees-understand-their-compensation-plan) ![post_img](https://cdn2.hubspot.net/hub/2558854/hubfs/Future-Vision-Assets/post_img1.jpg?width=786&name=post_img1.jpg "post_img") ### READ MORE OF WHAT YOU LIKE. 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