16 Aug What is the Purpose of a Compensation Statement?
Compensation statements, also sometimes referred to as employee benefit statements or total reward statements, give employees an in-depth look at how they’re being rewarded. While some employers view them as an “extra” step in the already lengthy compensation cycle, organizations that have implemented them know that there is real value in issuing these statements to their workforce.
What Do Compensation Statements Contain?
These statements provide a broken-out look at the many ways in which the company is investing in its employees. In addition to base pay, compensation statements include bonuses, the value of any paid leave including sick, vacation, and PTO time, and the value of employer-paid insurance plans, such as health, disability, life, vision, and dental insurance.
In addition to these basic elements, total reward statements can also encompass stock options and company contributions to a 401(k), pension, or other retirement plan. Additional perks can also be outlined in these statements, such as tuition assistance, childcare, cell phone or company car usage, home office benefits, and much more.
Why Should Employers Offer Them?
Many organizations assume that their employees already know all the ways the company rewards them. While it’s true that many of your employees may have a basic understanding of their base pay, bonus, and benefits, associating a hard dollar amount with all of these rewards can serve as an eye opener for employees. Understanding the full value of employment may even help to drive engagement and retention. In fact, CEB research shows that improving total rewards communication can lead to a 50% decrease in turnover risk.
Reward statements are also beneficial for encouraging high performance. You can use statements to reiterate the ways in which top-performing employees are recognized for their contributions. When employees feel that their efforts are appreciated, they may be more inclined to contribute their best efforts to the company continuously.
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