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Employers Showing Total Compensation, A Good Idea?

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I don’t think so. My former employer recently instituted a policy where they would provide a sheet that detailed your total compensation for the year included with the raise (if you got one) for the upcoming year. The sheet broke down everything the company paid to employ you and it included your salary, education reimbursement, medical/dental/etc insurance, Medicare, social security, and perhaps some other stuff I forgot. Some feel that this was done so that the employee would fully understand how they were really compensated but I think it’s an insult to come right out and put it on a sheet, essentially saying “hey, be grateful we pay for all of this.”

Why? Well, the only legitimate “total compensation” value that anyone cares about is salary + education reimbursement, if you plan on going to school. The company has made no bones about the fact that they’re doing this to show employees how much they’re being compensated but a fair number have left the company for more pay. The only problem with doing this is that it doesn’t accomplish anything and can only bother people.

Anyone deciding to leave a company for greener pastures won’t forget to include education reimbursement because they are well aware of how much school costs and how much the company is paying for them. By putting that value and the cost of doing business, insurance and payroll taxes, you’re just telling your employees that they should be grateful because insurance and payroll taxes are relatively static and universal. Your payroll taxes will be the same regardless of your employer and your insurance will likely be very similar as well, certainly not a significant difference at least at our age.

So when an employee sees this sheet that says their total compensation amount is X and that’s a significant increase over their salary, wouldn’t the employee feel insulted? “Don’t leave for another company and a potential raise, stay here because you really make 30% more than what it says on your paycheck?”

What do you all think?

{ 28 comments, please add your thoughts now! }

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28 Responses to “Employers Showing Total Compensation, A Good Idea?”

  1. dong says:

    While I do think companies do it for their own benefit, I think it’s in the end a good thing. My company does not include payroll taxes and such but includes the value of the 401K match, and insurance costs in a statement they issue every year. I’m all for that especially if I’m looking at new job. While I think most employees do just look at pay and forget to include benefits such as dental, health, and insurance, getting a peak at those number makes it easier to comare the total compensation package at any potential new job. While benefits at most large firms are very similar – they can be vey different at smaller firms – and if you’re in the situation of leaving a job with solid benefits for smaller benefits it’s good to have those number in hand.

  2. I’ve always thought the “total compensation” presentation was a bit stupid. Like I care what my firm paid into Social inSecurity on my behalf! It’s not like I’ll ever see a dime of that anyway.

    The way mine is presented makes my compensation look worse. When I started this job my wife’s benefits at work were actually much better than mine, so I didn’t have any firm-paid benefits. My total compensation was my salary number plus a line for social security taxes and another for medicare tax. It doesn’t exactly make the most positive impression in that situation.

  3. ~Dawn says:

    I never liked them showing that to me, it was kind of like saying “Stop complaining about the CEO’s salary, look at all the wonderful stuff we do for you!”

  4. wanzman says:

    I tend to agree with you jim.

    Also, as payroll taxes, of course, are computed as a percentage of your salary, when you leave to take a higher salary at another company, you could argue that the raise you are getting is actually bigger than the increase in salary. I think it is rediculous for a company to use payroll taxes and insurance benefits to show employees how much they are being “paid”. It seems like the company is wanting recognition for doing the things it should. Last time I checked, the U.S. government doesn’t high five me just for paying my taxes.

    But I have seen employers using this in their favor. I was at a career fair not too long ago and a company had a huge banner saying “Want to make 90,000 your first year?”. And of course there were tons of people in line to talk with the company….as it turns out, the salary was only 30 or 35K I think and they were showing everyone all the things you mentioned such as payroll taxes, education, insurance benefits etc. I though it was funny to see everyone lining up though, I guess the banner did its job.

    But it definitely wouldn’t mean a thing to me if my employer handed me a sheet showing me those totals. I am not that gullible. In fact, I might use it to say that when they give me a 4 or 5% raise at the end of the year that it is actually a lot smaller since they only calcualte it on my actual salary. Maybe they should calculate bonuses and raises off of that total compensation number if they want to toot their horns about “paying” people that much…

  5. wanzman says:

    If they want to argue that that is our true compensation, then why is it that raises and bonuses are calculated on only the actualy salary. So if a make 45,000 a year, but they say my total compensation is 90,000, then that means when I get a 5% raise then it is really only a 2.5% raise, right?

    I would be glad to play along with that little game as long as they used the total compensation number to make calculations that might be for my benefit….and not just theirs!

  6. Cody says:

    I get these annually from my employer as well. I don’t necessarily feel insulted by it, but I do chuckle at it. To me it’s “official” acknowledgement that they are under-paying their employees; otherwise why send it out? I’m sure it works though, because many people probably don’t think about such things analytically and to them it may give a warm fuzzy feeling because they can now overstate their earnings in social circles.

    But I’m going to disagree with you on one point. Although education reimbursement is important to many people, I’m not sure it’s worthy of being included as one of “the only legitimate ‘total compensation’ values. I’d say what matters most is just salary + bonus. Then things like the quality of your health care package, 401k matching, stock options, and education reimbursement may follow.

  7. Rich Slick says:

    ‘Why? Well, the only legitimate “total compensation” value that anyone cares about is salary + education reimbursement”

    Actually, I have to totally disagree with your premise and statement. I can tell you first hand that HEALTH INSURANCE costs are a big deal to me and most people. Health insurance costs can range from $100/month to $500/month depending on which company you work for and that’s REAL money out of your pocket (and your employers).

    Second, 401k contribution can range from 0% to 6% or more. If you make 60k/year and your employer matches 6%, that’s an extra $3600.00/year vs. $0 for employer that doesn’t match.

    So add it up. $400/month health care cost difference, $300/month extra 401k income = $700/month in additional compensation all for your benefit. To completely disregard this is silly and wrong.

    There are even more factors such as company paid life insurance vs. you pay life insurance; wellness benefits, cell phone reimbursement, etc.

    So while employees may be leaving for a $600/month raise at another company, if they disregard the health, 401k and other benefits they may actually be worse off by $100/month than they were with their former employer.

  8. Clever Dude says:

    I agree it is pretty much a way for them to “show you how much they’re covering your butt with benefits”. I don’t get them from my current employer, but I’m making $33k more per year that the last company who gave these reports to me. Right now, I’m paid what I should for my experience and the specialized field I work in.

  9. samerwriter says:

    A couple notes:

    1) I’ve never met anybody who thinks he’s overpaid. We all think we’re underpaid. Despite what headhunters would like us to think, many of us are wrong. We’re actually quite fairly paid.

    2) My employer does the same thing (providing Total Compensation information). One of the problems is that much of the compensation cannot be fairly valued until it’s realized. For example our annual bonus, or equity compensation. This causes some angst among employees when the actual value ends up being less than HR estimated.

  10. I think it’s good for the employer if they know they are above the curve in some areas. Perhaps the employer gives a ton of educational reimbursement. If so, I think it should remind it’s employees that.

    Here’s an example… my employer gives me lunch everyday and dinner if I stay late enough. I get to order it from a take-out menu online and have a daily allowance for this benefit. If I were to leave to go to another job, I would most likely not get this perk. I think my company would be smart to add that cost in. Granted, it might not be the best of funds, depending on the individual. I may prefer a few thousand more in salary from another place and brown bag it, but it’s still an extra value of some sort.

  11. Joe says:

    The reason to publish this for companies that pay 100% of health premium’s is so that employees can make a proper decision about whether or not to leave. Someone else may pay more money, but have weaker benefits. For lower salaried employees-particularly those with a family, it can be a big difference. For those making big bucks, that $250 a month difference may not matter, but for someoone starting out making 30K, that’s a big difference.

  12. jim says:

    I should amend my earlier statement about education reimbursement and salary are the only important things to most people, I meant that those are really the only true “variables” when comparing most jobs. I didn’t mean to marginalize the value of other things, just wanted to say that health care, insurance, 401k, etc. would all be very similar (though not quite as similar as social security and medicare).

  13. Matt says:

    I doubt it’ll keep anyone who wants to leave from leaving, but realizing that insurance costs are NOWHERE REMOTELY CLOSE to “relatively static” (and indeed have been skyrocketing for years) might help hold off some bitching about what seems (to the employee) like a compensation standstill.

  14. Phil says:

    In my view, I would have to look at the culture of the company before deciding on whether a “total compensation package sheet” is intended to be benevolent or malevolent.

    One point is that the company is paying someone to specifically detail every employee’s compensation package. I’m not saying that non-monetary — or otherwise — compensation shouldn’t be tracked, but it does raise an important question: “Why is the company doing this?”

    Another point is that you do not know how much you’re worth until you actually start looking at job boards to find out what the market is willing to pay someone such as yourself with your general skill-sets. For me, it turned out that my current second job (total industry change, actually) pays me >20% more than what I had been making in a previous job that paralleled what I originally went to college for.

    Bottom line: The whole discussion is academic until you find out (1) the culture of your company and (2) what anyone else is willing to pay you for doing the same job elsewhere.

    Your job is worth precisely and exactly what someone is willing to pay you.

  15. CK says:

    I’ve never received one of these but I can’t imagine getting so worked up about it. It’s a piece of paper look at it and move on.

  16. zen says:

    While I agree it’s a bit pretentious, it does give you all the information you need to compare to a new job.

    And like has been stated, there might be a reason why they give/don’t give the collection of information to you, but seeing how more information isn’t necessarily bad, I’d welcome knowing what the company ‘does’ for me. It’ll help me when I look at a different company and realize that they may pay me more money, but my benefits/other options may suffer because of it.

  17. RootAnn says:

    My husband and I have both received these in the past. We just look at them as another P.R. tactic for the firm. I’ve heard some people be surprised at how much of the health insurance costs are covered by the employer, but if they compared year-to-year (at my husband’s place of employment), the employer’s share is going down. Not exactly impressive. It is a “look at how much we do for you” brochure. Waste of money to print it out, but obviously someone thinks it is worth the effort.

  18. Dustin says:

    Knowing the exact raise I would be receiving 6 months from now, regardless of my work performance would probably deter me from doing much more than that raise afforded me.

    Also I was told once that the average employee cost approximately 50% more than their salary for benefits, expenses, etc. Just following this rule and a person could figure out a nice approximation.

  19. ehm says:

    I like seeing this. Yes, social security and medicare are irrelevant because they are payroll taxes, but seeing health insurance is good.

    I’ve worked for local gov’t and a non-profit in the past. The salary is lower, but that was partially made up by covering 100% of health care premiums. When I made the move to a corporate position, it was important to know the exact costs so I could make sure that I was adequately compensated (since I now have to pay a portion of my premiums).

  20. Tinyhands says:

    Look at it from executive management’s point of view though. The SEC now wants companies to report the total compensation of the executives. From the CEO’s point of view, he’s just doing it for the whole company (although not on the 10K).

    There’s A logic to it, the value of which is debatable.

  21. MoneyFwd says:

    I think this could be useful just for bargaining, or when changing jobs. Since my wife will hopefully get a new job in september that pays better benefits, we want to drop my benefits. I think the company should pay me what they would have paid for their portion of my insurance. Some companies do this, I don’t know if mine does, but it makes sense that they should.

  22. eROCK says:

    I actually had to bargain with a recruiter in regards to my salary and she must have had a sheet with her at the time … she tried to tell me they could pay me $x more because they’ll be paying for my training.

    I seem to think training is part of the companies expense in highering me, I shouldn’t have to bear their burden, IMHO.

  23. mapgirl says:

    I got one at my last job and it helped nudge me out of that shop. For the $8K they spent on my health insurance, I could have canceled my coverage and shopped around for a private HMO at half that price. But in saving the company money, there would have been no commensurate increase in my base salary. Nor do I think they would have just given me the cash if I asked for it. (which I didn’t even try to do. I left before actually switching insurance carriers, but that thought had crossed my mind many times.)

    The statement is an eye-opener if you’re at the wrong firm. If you’re at the right firm, it means nothing. It’s a bit of PR spin saying, “Look at all the wonderful things we do for you!” But really, it’s a glaring reality check of what you are/are not receiving. I think my old company meant for people leaving to look at their figures and make sure they asked for a higher, ie non-competitive salary, at their new company and then get denied the higher compensation they were looking to receive and then stay. However, as was my case, the desired salary that I asked for was denied, but I still received a very good package that was still $10K higher than my old company’s total compensation. So my old company can go pound sand for the two years of undervaluation they gave me.

    I feel that I might have more to say about this in the next few weeks. I can tell you that receiving this did help push me out the door. I’ll have to dig out my old statement. I bet I saved it.

  24. Tool Man says:

    Showing you a number is all fine and dandy but that’s all it is, it’s just a number. If the company in question is giving total compensation reports to combat a perceived disparity in compensation within an industry, how about giving us a ratio or comparables. So what if I’m making $100,000 in total compensation. I have nothing to compare it to. They give you these reports to put a larger number in front of you in hopes you will focus on the larger, total number than the actual salary. I doubt a company would ever give comparables, because that would force their hand and share information that they hold in super-secret places.

  25. whodean says:

    Like it or not the report your company is giving you is the total of what it costs your company to employ you and it is a very viable report.

    To “Tool Man”…Do you understand the basic tenets of capitalism and competition?


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