The Art and Science of Total Compensation Statements

Posted on May 7, 2009



In the April and May issues of Workspan (the monthly publication sent to WorldatWork members), there is a two-part series entitled “Ease Concerns About Total Compensation Statements.” The magazine’s online edition is available only to subscribers; for readers who have access, links to the articles can be found toward the bottom of the main Workspan page, under “Departments.”

While the two articles provide helpful tips and useful advice, they focus primarily on the technical side of a total compensation statement (TCS) project – for example, in the May issue, the article states that “assumptions cannot be made about data accuracy, and double-checking should be the mind-set.”  True enough, and certainly gathering the data necessary for a total compensation statement – and ensuring that the data is accurate and up-to-date – can be a challenge. But there’s another side to the process of creating a total compensation statement that the articles only touch upon very briefly, which is what I would call the “right brain” part of the process – the design and content development of the total compensation statement.

So, in addition to making sure that you have complete and accurate benefits and compensation data, creating a successful total compensation statement  requires asking the following questions (and being sure you have good answers before you get started with the project):

  • When will a total compensation statement have the most impact– While a TCS can have a positive impact at just about any time of year, give some consideration to whether there’s a particular point in time when the statement will have a bigger impact – for example, an employer may want to distribute a statement just before open enrollment as a way to get employees more actively engaged in the enrollment process.
  • What type of format will “click” with employees – In some organizations, a shorter format may be more effective, whereas for others, employees would react more positively to a longer statement containing more detailed information. The key is choosing a format that will appeal to the largest number of employees.
  • What’s the overall goal of the TCS – Just about every total compensation statement has the basic goal of educating employees on the scope and cost of employer-provided benefits. But what else do you expect from the statement? For example,
    • Increased retention?
    • Is the statement part of an employer branding campaign?
    • Do you want to call out particular benefits that are underappreciated by employees?

Whatever the specific goals are, it’s important to identify them in order to make sure that the statement is designed to meet those goals.

  • Are you looking to change behavior– While this can be viewed as a subset of the preceding point about understanding the goals of the statement, a TCS project where a central goal is changing behavior needs to be designed a bit differently than one where the focus is to increase awareness, understanding and appreciation. For example, if a goal of the total compensation statement is to increase participation in a 401(k) plan, the statement might contain different information – requiring different data – than a statement intended only to increase employee appreciation of the company match.

These are just a few of the things employers should consider when planning a total compensation statement; there are many others as well. The key point, however, is to remember that while the data collection and analysis is a critical step in the process, it should come after deciding why the statement should include particular data and how the data can be used most effectively.

Thanks to @Neuronarrative  for the illustration.