How to Define Total Compensation: A Quick Guide

Focusing on salary no longer cuts it for most organizations, so it is important for companies to differentiate themselves on the basis of a rewarding work environment instead of just money.

Total compensation has emerged as a great tool for retention. Its focus attempts to make the company talent aware of all that it is getting from an organization in a way that is personal and relatable.

To define total compensation, it is important to first understand its components. Unlike salary or pay that deals with only the monetary aspect of a position, total compensation takes a more holistic approach. It obviously includes essentials like base pay, variable pay (typically linked to performance), bonuses and cash prizes but it also brings to light the aspects that contribute intangible value to the lives of employees. These may include skills learned on the job, trainings, the opportunity to move into more mature, leadership roles and perks like a gym membership, day care facilities and health insurance.

However, total compensation needs to be shared with employees before it can be of any importance to the issue of turnover. A total rewards strategy does the following:

  • Gives workers access to the total comp breakdown throughout the year.
  • Highlights aspects that are of special significance to certain groups of employees based on their preferences and habits.
  • Drives home not only what the employees receive in terms of comp dollars but also intangible benefits.
  • Shows exactly what a worker may leave on the table if they seek employment elsewhere.

Total compensation is the unique value proposition of an organization. It not only engages existing talent, it also boosts the companies reputation, attracting top talent from across the industry.


HRsoft is a leading provider of compensation management and total rewards software. For more information on our Total Rewards software, click the button below!

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