Finding and retaining valuable employees is necessary to keeping your business on track. New hires cost a lot to train and onboard, so you want to do everything in your power to make sure they stay once you get them. One way to boost employee retention is to make sure employees understand their total compensation. Here’s how:

What is Total Employee Compensation?

Total employee compensation is made up of employee salaries, benefits, and other incentives. The employee salary, or base salary, is what an employee is paid as wages. Benefits might include things like paid time off, health insurance, of 401(k) plans. Incentives can include annual bonuses or profit sharing.

Why Should you Care about Total Employee Compensation?

When potential hires are looking for a job, they are likely to factor compensation into their decision, but may pass your job offering by if they don’t understand total compensation. Additionally, employees at your company may be inclined to leave if they are left in the dark about their total compensation. Total employee compensation can be expressed in a solid dollar amount. If you can show this dollar amount to employee and potential hires, you will have a stronger, more dedicated, workforce.

How to Determine an Employee’s Total Compensation

The first part of determining total compensation is knowing the base salary. This can be found by taking a total annual salary and dividing it by the number of pay periods for a gross base salary figure. For example, if you have an employee that receives and annual salary of $50,000 and you pay them biweekly, you divide the $50,000 by 26 pay periods to get $1,923.08 as the base salary. Commission pay may also be factored into total compensation, depending on the position and industry.

Next, you need to calculate the cost of paid time off. This is done by multiplying the amount of paid time off with daily wages. Continuing with our example, let’s say the employee gets 10 days of PTO a year. $50,000 a year is equal to about $196.08 a day. Multiply $196.08 by the 10 days of PTO to get $1,960.80.

The employer cost of offered insurance, including things like health, dental, vision, life, and 401(K) match are also added into an employees’ total compensation calculation. Look at how much you pay for an employee’s insurance per pay period. Add in any fringe benefit costs (company cell phone, company vehicle, etc.) and yearly/scheduled bonuses. Once you’ve calculated all these factors, you can use total compensation number to better communicate what employees will receive working for your company. With our example above, you may have a position with a wage of $24.51 an hour or $50,000 a year. If you communicate with prospective and current employees in terms of total compensation, you’ll include $50,000 (base pay) + $1,960.80 (PTO) + insurance costs + benefits + bonuses + other perks, which makes for a much more appealing number.

If you have any questions about total employee compensation, feel free to reach out to Helpside at