How Do Employee Benefits Affect Total Compensation?
Benefits can range from simple participation rewards, including vacation days and remote working opportunities to full-scale comprehensive dental, health, and vision insurance plans. Suffice to say, as an employee, it’s incredibly attractive for a business to boast such plans – with dental, vision, and health being at the top of the list. This is thanks to the protection it offers both to the insured employee but in many cases their dependents and spouses as well.
Employee benefits directly correlate to total employment compensation, as the more benefits an employee receives the greater their total employment compensation (TEC). The quality and accessibility of these benefits matters as well. Why does this matter? In this blog, we’ll break down how employee benefits affect TEC and why TEC is so important to you as an employer.
What is total employment compensation (TEC)?
To answer the question, “how do employee benefits affect total compensation?” we need to first address the matter of what total employment compensation is. Total employment compensation is the collective compensation that you – the employer – have provided to your employees in an exchange for their duties and services. This number will include the base salary (either their annual salary or an hourly rate), the dollar amount of any benefits you offer (health, dental, vision, paid time off, profit sharing, gym membership, retirement plans, etc.) commissions, and bonuses.
The list that makes up total compensation may include:
- Paid leave, including military pay, jury duty, vacation, personal, holiday, bereavement
- Healthcare – including health savings and/or flexible spending accounts
- Life insurance
- Development opportunities
- Career advancement opportunities
- Retirement plans
- Relocation expenses
- Disability insurance
- Employee assistance programs
- Hourly pay or annual salary
Having a better total employment compensation allows you as the employer to attract top talent in your industry while also retaining your best. It may also help provide you with a better idea of what the full costs are of every full-time employee working for you.
How is total employment compensation impacted by employee benefits?
Because your TEC encompasses more than solely people’s direct pay, it is directly impacted by the inclusion of benefits. Health insurance, stock options, social benefits – the inclusion of these all positively impact your TEC, which is great for you as an employer. It’s also something to keep in mind when you’re looking at a budget and you aren’t clear as to how much money is going into each full-time employee your company has hired. Employee benefits account for roughly 30% of the value in total employee compensation.
Why is total compensation important?
Total compensation essentially shows that your business has an effective compensation management program, which is vital to ensure that you can win and retain top talent within your industry. Employees look for jobs that offer great compensation packages that mean a lot to them. You’ll find that among the top-rated benefits are health, vision, and dental. However, different employees will find different benefits more or less valuable.
Candidates may be less inclined to apply for your company and turn towards competitors that offer better benefits if your packages don’t stack up. Your existing employees may also be less inclined to work for you if your benefits packages are lacking.
It can be a great asset to include your employment benefits when laying out your recruiting process. Applicants are more inclined to partake in what you do when they hear about the compensation and benefits being offered during the interview and recruiting stages. Benefits like student loan assistance, flexibility with work location, and career advancement are deemed highly sought-after. By showing you are willing to discuss these benefits, you capture the interest of candidates.
How do you market your total employment compensation?
TEC is marketable and can be used as an opportunity for your company to grow and engage current employees. It shows the value in working for your company, in layman’s terms. To show new benefits to your existing employees, consider sending out a total compensation statement. This can go over, in detail, the benefits that are being offered and who qualifies. The same statement can be used to show to potential candidates. The end goal is to show the monetization quality of the benefits and/or perks your company is offering.
How do you calculate total employment compensation?
It’s hard to calculate total employment compensation as some benefits can be tough to put a numerical value on, especially those such as the ability to work from home and flexible scheduling. Otherwise, it’s only a matter of adding the cumulative value of every benefit you offer to your employees, including their salary offerings. Take this number and divide it by the number of hours that employee works within a year. The end result is your TEC hourly rate. Candidates may use this number to compare with other competitors if they are looking at multiple different jobs all at once.
Still unsure about how employee benefits affect total compensation or want to know more about the benefits of a positive total employment compensation number? Discuss with Hitchings Insurance Agency’s representatives how you can improve your TEC with benefits.