Posts Tagged ‘total compensation’



Employee Benefits Made Up 30.3% of Total Compensation in December 2010

That’s just over 43% of pay!

According to the Bureau of Labor and Statistics, employer-paid benefits make up a big chunk of change – 30.3% of total compensation for employees across all industries and sectors.

total compensation percentage

The BLS study shows that private industry employer costs for paid leave benefits averaged $1.89 per hour worked, while legally required benefits was $2.28 per hour worked. Take a look at the study to compare the compensation costs for state and local government workers, private industry workers, and civilian workers.

COMPackage believes that the proportion of employer-paid benefits is actually higher than 30.3% for many industries, because the BLS study is not taking into account all possible benefits, such as travel expenses, training, company outings, free suburban parking, cell phone expenses, etc. COMPackage has always believed that employer-paid benefits as a percentage of base pay is 43%, which is what the BLS percentage of Total Compensation number equates to. But we also believe that when you add these above benefits that the BLS wouldn’t typically include, then average definable benefits are actually even more, especially for companies employing higher salaried workers!

Included in the amount accounted for by the BLS were employer costs for vacations, holidays, sick leave, and personal leave. Other costs included legally required benefits, including workers’ compensation, (1.5% of total compensation); state unemployment insurance, (0.7%); and federal unemployment insurance, (0.1%).

This study is important for a couple of reasons:

a)It shows whether there is a rise or fall in how much employers are paying for total benefits of employees. (There was an increase of nearly 3% over the last three years.)
b)It points out that employer-paid benefits make up a tremendous portion of employees’ total compensation, a point that is often not communicated to employees, even though it is a very substantial amount of their pay.

When the total costs of employee benefits, like insurance, health care, and paid-time off, go unreported, how can employees possibly decipher their true compensation? If employees can only attach a number to their salary, and do not understand their total worth to the company, both parties suffer unrealistic expectations. Employers feel like they’re paying employees too much, while employees feel like they’re being paid too little. Neither party is wrong, but without knowing and reporting on how much the actual costs are, neither party has a leg to stand on, whether negotiating salaries or finding ways to retain employees.

When was the last time you took a hard look at the numbers you’re spending on your employees? And if you are already using total compensation reporting methods, what types of benefits are you including in your total compensation reports?

Are You Offering Competitive Compensation?

One of the toughest decisions small business owners have to make is how much to pay their employees. Too little and they risk high turnover and low morale; too much, and they’ll never get ahead financially. Calculating salaries is a tightrope walk that few new employers feel comfortable with. Do you know if your salaries are competitive?

Use the right tools
Fortunately, there are a number of readily available tools at your disposal to help you calculate the ideal salary for each employee in your company. It’s important that you use all the resources you can, because your employees are almost certainly already using them, and they know exactly how much they should be making. Start with free tools from the Bureau of Labor statistics like their Consumer Price Index and Employment and Wage Surveys to get a rough idea of the cost of living in your area and average salaries for employees in your industry. For more detailed information, consider using a salary calculator from a site like Salary.com.

Allocate funds
When deciding on compensation for each employee in your company, one of the things you’ll want to consider is which positions you’ll want to offer the most competitive compensation. For example, if you’re hiring for a position known for high turnover, you may not want to offer as competitive a salary as you would for an employee with many responsibilities who would be difficult to replace.

Compensate with benefits
If you can’t offer the same high salaries as other employers in your industry, consider making up the difference with benefits. Certain benefits like free parking may not cost you a whole lot, but could make a world of difference to an employee comparing your offer to another. Show employees and recruits how much their benefits are worth through a . Compensation reports clearly and concisely show how your benefits bridge the gap between your offer and the seemingly higher salary at another company.

Reducing Costs by Reducing Employee Turnover

Employee turnover costs are hard to pin down. Many employers don’t have the time to calculate their exact costs for replacing a worker since they the cost seems to be minimal and unavoidable. The truth is, however, that HR experts estimate that the cost of replacing one employee is at least 25 percent of that employee’s annual salary. These costs include:

Separation Costs

  • Cost of exit interview
  • Increase in unemployment tax
  • Separation pay
  • Administrative costs

Replacement Costs

  • Placing job ads
  • Cost of employees’ time for interviewing process
  • Background check cost
  • Bonuses and administrative costs

Training Costs

  • Cost of training material
  • Cost of trainers time
  • Time it takes new employee to ramp up

Intangible costs also include the stress a short staff puts on other workers, interrupted client dialogue and lost company knowledge. If you add it all up, you are probably losing much more than you thought on each employee that leaves your company, so doesn’t it make sense to start doing something about it?

The solution to reducing turnover is different for every company. The most important thing you need to do is find out exactly why employees are not happy with your company and fix it. Are employees overworked? Do they hate the work environment? Do they want more competitive salary and benefits? You may not see a dramatic change within a couple weeks or even months, but whatever money you invest in your employees in the short term, you’ll see multiplied in the long term with reduced turnover and higher profits.

Effectively communicating to employees through employee benefit statements can help reduce turnover, as well. Ensuring employees are aware of the company costs associated with keeping them at the job can play a significant role in whether or not the DO stay at the job.

Would love to hear your thoughts and experiences on the costs associated with employee turnover in the comments below!

Best Exit Interview Strategies

An exit interview is one of the easiest ways to reduce turnover in your company. It usually takes about 5-10 extra minutes to talk to an employee who is voluntarily leaving, and an interview can reveal information that you’d never learn from your current employees. Most employers who ask the right questions during exit interviews find departing employees extremely frank and helpful.

Even though exit interviews can provide invaluable information, studies have shown that most companies do not have a solid exit interview strategy in place. If you don’t have an exit interview process, follow our simple steps to get the most out of your exit interviews.

  • The best time to ask employees the questions you’d ask during an exit interview is when they’re still happily employed. If you learn about problems within your company before it’s too late, you can stop dissatisfied employees from leaving in the first place.
  • While some companies give departing employees a form to complete, we recommend a face-to-face meeting. This will produce more honest answers and provides more opportunity for follow-up.
  • Make the exit interview comfortable. Employees should know that there won’t be retribution for an honest discussion.
  • If the employee who is leaving is extremely valuable to your company, consider asking if there’s anything you can do to encourage him to stay. It can be relatively easy to retain an employee if compensation is his primary reason for leaving.
  • Examine all feedback gathered from exit interviews and create policies that address recurring issues. The best exit interview in the world won’t do any good if it doesn’t lead to change.

The following are a few questions you may want to ask during an exit interview:

  • What is your primary reason for leaving? Are there secondary reasons?
  • Was there one event in particular that made you leave?
  • What were the most and least satisfying parts of your job?
  • Did your duties meet your expectations?
  • Did anyone in this company discriminate against you or harass you?
  • What would you do to improve our workplace?
  • Were you happy with your compensation?
  • Did you feel communication with management was open during your employment?

If you’re looking for more ways to reduce turnover, consider total compensation reports.  These reports show employees exactly how much their benefits are worth.