What Belongs in a Total Compensation Statement?

Posted on January 17, 2012

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Usually the first topic I discuss with new clients who engage my firm to create total compensation statements is what to include in the statement. While every total compensation statement has certain core elements to it, other parts may or may not be relevant to a particular organization.

The primary takeaway message from any total compensation statement is that the cash compensation received by employees is only one element of the financial rewards provided by the employer. The dollar value of benefits – medical and dental insurance, life and disability insurance, retirement benefits, etc. – easily makes up at least 30% of typical compensation and benefits packages.

But what about including other elements of an organization’s EVP (employee value proposition)?

In the January 2012 edition of Workspan, John Bremen and Laura Sejen of Towers Watson discuss the evolving understanding of the relationship between total rewards and EVP. “An organization’s EVP,” they write in their article, “encompasses jobs, culture, colleague, mission and values, as well as total rewards.” In this model, an employer’s total rewards program is one (very important) element of the overall EVP, though not synonymous with the EVP.

So does including other elements of the EVP enhance or detract from the core total rewards message which is at the heart of a total compensation statement?

What we have seen in the communications that we create is that, in most cases, including other key elements of the employee value proposition creates a more robust and effective total compensation statement. While a total compensation statement should not be an employer’s only way of communicating key elements of pay, benefits and EVP, it is definitely one of the most important pieces of an overall employee communications program. Taking the opportunity to remind employees about the many advantages of a particular workplace – in addition to strong pay and benefit programs – should be seen as a springboard for ongoing communications about both total rewards and the overall employee value proposition.