The pay an employee makes on a daily basis, whether hourly or salary, is their total pay right? Wrong! Daily or hourly pay, base salary, and total compensation are very different ways of measuring an employee’s overall compensationSaw. While nearly everyone is aware of their pay rate, there’s other hidden benefits that you should be considering.
What is Base Pay?
Base pay is the money that employees make for doing their jobs – either salary or an hourly wage. It’s expressed in gross terms, such as $50,000 per year or $15 per hour. Base pay doesn’t include taxes and other deductions taken out of the employee’s paycheck. Base pay also commonly includes any paid time off an employee is eligible for throughout the year. PTO paid in addition to base pay is most common for hourly, non-exempt employees.
Other pay – such as overtime, bonuses, or commission – are shown separately from base pay. Total earnings or total wages would include base pay plus any other earnings categories your company offers.
What is Total Compensation?
Total compensation is typically expressed in gross annual terms, but base pay is only one component of it. Total compensation also includes the dollar value of any and all benefits that a company pays for the employees. Retirement matching, health and life insurance, and many other services and benefits all fall under the umbrella of total compensation.
When evaluating pay and compensation, some items will be taxable while others won’t. Most kinds of pay are taxable, including salary or hourly pay, paid time off, bonuses, commissions, or profit sharing. Other benefits like insurance and tuition assistance are non-taxable within certain federal limits. It’s important to understand which taxes affect an employee’s taxable income, and how that affects the total compensation.
Total Compensation Statements
If your company offers and pays for benefits, it’s advantageous to consider providing annual total compensation statements. While employees are aware of their base pay, they are often unaware of the scope of what the company pays towards their benefits. Total compensation statements give a comprehensive list of all the the wages, paid leave, and benefits your company pays towards employees’ wellbeing. It’s a great way to help employees evaluate the value of employment and help them understand you appreciate their contributions.
Total compensation statements can be an effective onboarding and retention tool for your HR department. It illustrates exactly how much an employee is actually receiving from the company. On average, a company’s investment in benefits for an employee is around 30% of their total compensation – so it’s worth making sure they know about it!
How do you calculate total compensation? Put it all in a spreadsheet and let us do the hard work! We’ll input all the data into a custom, individualized statement for each employee based on their unique elections. Additionally, we’ll calculate the totals so that it’s easy to see the distribution of employee benefits. We can then mail out the statements or ship them directly to you! It’s that easy!
To make it easier for you to collect your benefits, we’ve created a handy BENEFITS CHECKLIST to help list the various offerings that should show on your statements!