Do your employees understand how much they really get paid?
They probably know their base salary, and that the company pays a portion of social security and unemployment taxes, and the company-paid benefits. But do your employees appreciate the value of these benefits?
Having dedicated and enthusiastic employees is essential for business success. One way to help employees recognize their role in the company and the benefits they receive is to periodically recap their compensation package in terms they understand. This can help them realize the value of different components of their package, and hopefully add to their motivation and loyalty. In addition, this process can assist an owner or manager to better understand the cost of perks, benefits and other personnel compensation.
The analysis should be simple. To make the information easier to grasp, itemize each component of an employee's package on an hourly basis. Show the gross hours net of vacation, holidays, and other items - calculate the rate just for the net hours worked.
Then show a breakout of each component of compensation, such as base wages, overtime, bonus, 401(k) match, insurance, payroll taxes, fringe benefits, etc. - as many items as you want to include. In addition, you can include other costs that are not real compensation, but are costs that help the employee in job performance, such as training expenses, travel and meal reimbursements, or company provided vehicle costs. Sometimes, it is important to include these items to demonstrate that they are real costs, not "free money."
A good time to present this information is during the employee's annual or semi-annual review, when it is time to talk about future performance goals and the role the employee can play in the success of the company.
The idea is to communicate to your employee the value of their compensation package and to help them understand the part the play in helping the company be profitable. The process of performing these calculations can be an eye opener for an owner or manager, let along the employee.
This recap can be integrated into a discussion of goals and performance expectations with all levels of employees-from laborer to executive. By taking the time to go over these items with your team, you can help instill a culture of responsibility, communication and financial understanding-all building blocks of business success. Email me (sscoggan@leverich.com) if you want a sample compensation recap.
