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I remember the old days when health insurance benefits were a given and nobody thought much about it. But HMO’s changed all that and today it’s a major cost for employers. In fact, it is estimated that 25% - 40% of an employee’s total compensation is in the form of benefit costs.
Unfortunately, employees often discount non-cash compensation simply because they don't see it in their paychecks. To address this issue, some firms are now preparing Total Compensation Statements for their employees once a year.
Why it helps
- Seeing it in black and white makes it real.
- Employees know exactly what you invested in them, reinforcing that they are valuable assets.
- Reminds them that everyone is paying more and you're all in this together.
- Encourages employees to take advantage of benefit programs. The more they use your benefits, the more invested they are in your company.
- It creates a more transparent atmosphere with open communication.
- If they receive another job offer, they can base their decision on total compensation and not just salary, as is often the case.
What to include
1. Actual pay: base salary, incentives, bonuses, overtime, etc.
2. Monetary value of time off
3. Your share of: FICA, health insurance, life and disability insurance, retirement plan contributions
4. Formula for figuring out value of income protection insurance
5. Estimated tax savings from 401(k) and flexible spending accounts
6. Balances on retirement accounts and investment plans
Your accountant can help you prepare the Total Compensation Statement or will prepare it for you. For a sample to use as a guideline, send an email with BENEFITS STATEMENT in the subject line.
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