The days of employers paying low wages and providing few extra benefits are over. Recent changes in the workforce makeup have led to many companies struggling to fill open positions, making it difficult for them to operate their business. Many economic experts agree that workers now desire more than just an equitable pay; they want more perks, better health insurance, and a better sense of work-life balance.
Compensation packages these days look much different than those of the past, and for good reason. If your company provides numerous types of compensation to your employees, whether paid parental leave, generous retirement contributions, and more, your employees will feel supported and appreciated by the company. This only encourages them to stay with your organization longer and put their best effort forward.
A total compensation package includes far more than just a salary or wages paid. Total compensation packages can consist of cash, as well as extra types of compensation like paid vacation, retirement account contributions, profit sharing, and more. Companies that can articulate and communicate their total compensation package from the onset through the digital offer can increase the number of job applicants who become actual employees. Welcome’s Digital Offer tool helps you make equitable and competitive offers, as well as improve acceptance rates while showcasing your company brand and story.
Organizations that provide a compelling total compensation package have a far easier time recruiting new employees. In fact, top talent will compete for a spot at your company, giving your company its pick. This is in direct contrast with other companies that are struggling to even receive a single application for their open positions.
There are two distinct types of compensation that can make up a total compensation package:
Direct compensation refers to the cash pay employees receive. This includes an employee's base salary, as well as bonus wages from holidays or overtime shifts. It can also include merit pay, such as bonuses for excellent performance. When people hear the word "compensation", they most often think of direct compensation.
Indirect compensation refers to the other types of compensation that companies can offer aside from money. This includes equity in the company, such as stock options and profit sharing. Some additional examples of indirect compensation include paid vacation and sick days, health insurance, worker's compensation, and other non-monetary benefits.
When designing your compensation package, there are a few traditional elements you should include, and some that are a bit less conventional. Some of the most common types of compensation include:
Many companies and executives don't see the inherent value in paying their employees to take time off, and U.S. law doesn't require private employers to provide any. Once again, employers that offer generous amounts of paid vacation have the upper hand when it comes to recruitment and retention, as employees today seek more and better work-life balance.
Not only does a commendable paid vacation appeal to employees, it can also help them return feeling relaxed, refreshed, and better able to think creatively and solve problems. Giving employees the opportunities to take breaks from work without worrying about their paychecks can benefit companies just as much as the people they employ.
Paid parental leave, both maternal and paternal, are not required to be paid by employers in the United States, but employers who do offer either or both have a major competitive edge. Not only are employees looking for companies that will give them paid time off to stay home and care for their new baby, but paid parental leave provides all kinds of physical and mental health benefits to both the parents and the new baby.
The Society of Human Resources Management (SHRM) even reports that employees that receive parental leave, especially women, are far more likely to stay in the workforce than those who don't receive paid maternal leave. Paid parental leave can also set your company apart as an employer that truly values its employees and their families.
One type of compensation that employees value most these days is comprehensive health benefits. SHRM reports that employees will stay at a company far longer when they like their health plan, and they most value plans that provide comprehensive care, are not too expensive, and allow them to choose their own providers.
If you can offer a comprehensive health plan to your employees at a low cost, you are likely to be several steps ahead of your competitors when it comes to recruiting and retention.
Many organizations have evolved their compensation packages, and they have started offering less traditional types of compensation, including:
Not many employers currently offer child care, but it's an innovative and popular addition to compensation packages these days. Organizations may offer on-site child care, so parents can drop their little ones off as they enter the office, or they can provide child care reimbursement or vouchers. Either way, current and future parents will appreciate working for a company that helps them lower childcare costs.
As with paid parental leave, providing childcare for employees can help prevent them from having to leave their jobs due to family obligations. In many situations, it makes more sense for a parent to leave work and stay home with their kids instead of paying for childcare, which can cost hundreds or even thousands of dollars a month. Offering child care as a part of your compensation package can help you keep valuable employees, and it may even attract new ones.
If you're looking for a way to keep your current employees motivated, introducing a profit-sharing plan might be worth a shot. Profit sharing is the process of giving employees a share of the profits the organization makes in a certain period of time- usually quarterly or annually.
Profit sharing can help motivate employees to accomplish company goals, because the more the company makes, the more they can compensate their employees. Successful profit sharing compensation programs are those that share a worthwhile amount or percentage of their profits.
Transportation reimbursement isn't a common type of compensation, but it is a welcome addition to employees' compensation packages when they have long commutes or have to rely on public transportation. Transportation reimbursement can include the cost of an annual public transportation fee, parking garage fees, or gas and wear and tear.
Many companies also provide company cars for their employees, especially if they have to travel frequently. This functions as a type of compensation, and it makes logical sense to provide transportation reimbursement in some situations.
Many human resources professionals consider themselves advocates for the company's employees, and providing comprehensive compensation packages can show your employees how much your company values them as individuals and employees.
This also means that as human resource and people leaders, you must become familiar with the aspects of compensation that current and prospective employees place the highest value on. For example, do compensation offers that provide more shares in the company but a lower salary attract more new employees, or is it the other way around? Or, would a more comprehensive benefits package be more appealing to prospective employees?
At the same time, the compensation packages you offer should align with the company's missions, values, and goals. If your organization has a clause about putting people first in its mission statement, reflect that in the compensation you offer with direct and indirect forms of compensation that truly put people first. When redesigning compensation packages, human resources professionals have an excellent opportunity to positively impact their employee's lives and the organization as a whole.
When designing your company's new compensation package, a bit of extra consideration and care can go a long way. If you ever get stuck about what to include, or what to leave out, it never hurts to ask your current employees which types of compensation, or benefits, are most important to them. This is a great way to ensure your employees' voices are heard, and it can help the company focus on only the types of compensation that have the greatest impact.
If you're looking for a way to easily design and explain the most compelling compensation packages to your employees, Welcome’s Total Rewards tool may be just what you're looking for. We also make it easy to send digital compensation offers, and you can even provide new employees to visualize different scenarios of compensation packages.
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