It can be difficult to communicate to employees the full compensation they’re receiving from the company. Although they may know their base salary or hourly wage, this doesn’t present a complete picture. Most businesses offer many benefits that can be difficult to assign a numerical value to. Total compensation statements break down the worth of each benefit to present a more comprehensive understanding of employee compensation.

Direct Compensation

Direct compensation is the simplest component of total compensation statements. Many times, these items already have a numerical value assigned to them. Examples of direct compensation include:

  • Base salary
  • Hourly wage
  • Incentive pay

Vacation pay may or may not be included depending on how this benefit is implemented. For example, if a set amount of paid vacation hours are given to each employee at the start of the year, that would be considered direct compensation. However, if employees accumulate PTO and are expected to use that for vacation, that would be indirect compensation.

Indirect Compensation

There are many indirect compensation options, some of which are difficult to quantify:

  • Medical benefits paid by an employer
  • Development offerings
  • Employee assistance programs
  • Paid leave
  • Retirement benefits
  • Life insurance
  • Disability insurance

These are items that hold a great deal of value, but the cost of which employees don’t see. For example, assistance programs offer help finding mental health professionals, help to quit smoking and daycare options, all of which can improve quality of life. However, since employees aren’t aware of the funds put into running these programs, they may not see them as a benefit with monetary worth.

Benefits of Using Total Compensation Statements

A total compensation statement allows employees to understand the full scope of their compensation. This can inform their decisions about taking a promotion or leaving the company. It also shows that the company actively invests in employee well-being.