Demystifying Compensation with Data-Driven Total Rewards Statements
Attracting great talent has never been more competitive, with companies understandably wanting to provide the most enticing compensation packages possible. Unfortunately, many potential candidates and existing employees don’t comprehend the total value of their compensation package outside of salary alone.
The challenge for HR teams is to find a better way to show employees and future employees a more complete picture of their compensation. Read on to hear about how 15Five recently rolled out a new process to visualize compensation data and communicate total rewards value to our team.
The compensation conundrum
Studies show that the average employee doesn’t fully understand their compensation package. They either don’t know how to access the materials that explain their compensation or don’t understand them because the information is confusing or not presented in a comprehensive way.
This lack of insight creates uncertainty or misunderstanding about how the employee is compensated for their efforts. Because they’re not getting a complete picture, some employees may feel undervalued or under-compensated, ultimately leading to turnover.
In a recent episode of the HR Superstars podcast, 15Five’s Chief Culture Officer, Shane Metcalf, was joined by First Person’s CEO & Founder, Bryan Brenner, and SVP & Consultant Paul Ashley to discuss the evolution of total rewards.
“How do we move forward and innovate in our culture, benefits, and total rewards… how do we get people paid well and communicate it — that’s a whole other art of comp philosophy. You can design a really elegant program that’s competitive, but if you don’t communicate that, package it, and sell it to your people, you’re going to miss out on letting people know how good it actually is,” Shane explained.
The value of Total Rewards Statements
A Total Rewards Statement is a tool for summarizing and communicating the value of an organization’s total rewards offering. It’s a personalized calculation of an individual employee’s total compensation value and can include:
- Tax and fiscal contributions
- Employer national insurance contributions
- Short-term incentives (e.g. bonuses, commissions)
- Long-term incentives (e.g. equity, stock options)
- Other compensation
While the Total Rewards Statement provides a way for employers to educate their employees about their total compensation value, it’s not enough to simply hand it over and call it a day.
Employers must also provide support and guidance, addressing how salary, equity, benefits, bonuses, and perks are calculated and how they contribute to total reward value. Conversations around compensation should be transparent, proactive, and meaningful.
Communicating and visualizing compensation
Using compensation data to establish fair and equitable pay practices is essential in today’s competitive talent market. The more transparent you can be with employees and candidates, the better. That includes making total compensation clear and easy for employees to understand.
At 15Five, we recently reimagined our compensation strategy, philosophy, and program to ensure market competitiveness to attract, motivate, and retain employees. This included adopting a tool called Welcome to help employees visualize the total value of their compensation, equity, and our comp philosophy.
We believe in the importance of holistically quantifying employees’ total rewards, as base salary is only one component of our employer value proposition. Base salary, coupled with short-term incentives, long-term incentives, and benefits, demonstrate the broader total rewards value proposition. By having insight into what one’s potential annualized earnings are over the course of their tenure, it creates a sense of ownership in driving value for oneself, their team, and the company.
Showing candidates their total rewards offering also increases our ability to be competitive in the talent market and shows employees how much they’re valued for their hard work. That increased transparency can lead to better candidate acceptance rates and increased employee retention.
Welcome helps us shine a light on compensation with real-time compensation data, so we can:
- Fairly plan and benchmark salary and equity comp
- Modernize compensation decisions
- Empower employees with accurate market information
- Gain insights into the market and salary trends
Building a more equitable and transparent compensation structure helps employees more clearly understand their total value to the company and helps establish a foundation of trust.
Hear our latest conversation on compensation
We gathered an expert group of panelists from Deloitte, HRSoft, SimplyMerit, and 15Five to discuss the pros and cons of separating compensation from performance reviews. What makes an effective strategy? What happens when your approach creates unhappy and disengaged employees?
The panelists discussed employee development and the importance of having clear, frequent, and actionable conversations around performance and compensation.