Total compensation is what employers refer to as the full package of rewards they offer employees. This includes hourly wages or a base salary, and more — common benefits like health insurance and retirement plans, plus fringe benefits ranging from gym memberships to financial wellness solutions.
A strong total compensation package puts organizations in a better position to attract employees and build a motivated and successful team. Here’s why these packages are so important and how to improve them.
What is total compensation?
Total compensation represents every reward or benefit employees receive. It includes everything from monetary components like
base pay, bonuses, and commissions to non-monetary perks like paid time off, education reimbursement, and adoption assistance.
Base salary versus total compensation
An employee’s annual salary, or base pay, is just one aspect of total compensation. Base salary is the fixed amount employees earn — usually what’s listed in the job description or employment contract. Total compensation includes all earnings and benefits in the package or contract.
While not every element of the compensation package has a clear dollar amount attached to it, each has value. Understanding this distinction and learning how to measure that value helps both employers and employees make informed decisions about job offers.
What’s included in total compensation?
Besides base pay, here’s what to include in a total compensation plan:
Bonuses and commissions. Another form of monetary compensation, bonuses and commissions are linked to performance, targets achieved, or company profits. They incentivize employees to work hard and excel.
Benefits packages. Common (and sometimes legally required) benefits include health insurance, retirement plans, and dental — all of which provide valuable support for employees’ health and financial security.
Paid time off. Paid time off (PTO) includes vacation time, sick leave, and parental leave.
Fringe benefits. Fringe benefits are any benefits companies offer beyond the basics. They can vary widely, but many total compensation packages include flexible work arrangements, professional development opportunities, and wellness programs. EarnIn is an innovative example of a fringe benefit, giving employees access to tools to help enhance their financial flexibility.
Why does total compensation matter?
A comprehensive and competitive total compensation package attracts, retains, and motivates a high-performing workforce. Here’s what an effective package can do:
Attract top-tier talent. A strong package strengthens job offers, signaling to potential employees that a company values its people and invests in their well-being.
Enhance employee retention. When employees feel valued — which a comprehensive compensation plan helps achieve — they're more likely to stay with a company long-term.
Enhance employee well-being. Benefits like health insurance, retirement plans, mental health support, and financial wellness programs enhance workers' overall well-being.
Drive productivity and engagement. Employees who feel valued and supported tend to be more productive and invested in the company.
Build a strong employer brand. Companies that offer excellent total compensation attract higher-quality candidates and build positive reputations within their industries.
How to calculate total compensation
Knowing how to calculate total compensation is beneficial for both businesses and the people who work for them. For employers, quantifying
compensation and benefits helps with budgeting, ensures competitive offerings, and aids in communicating the full value of their compensation packages to attract and
retain talent. For employees, understanding their total compensation allows them to fully appreciate the value they receive beyond their base salary and make informed decisions about their career and financial well-being.
Here’s what to factor into your calculations:
1. Base pay. Add base salary or hourly wages.
2. Monetary incentives. Include bonuses, commissions, and any other direct cash payments.
3. Employer-paid benefits. Calculate the monetary value of benefits like PTO and the employer’s contributions to health insurance and retirement plans.
4. Fringe benefits. Assign an estimated monetary value to perks like
financial wellness programs, gym memberships, or mental health services based on market worth or the cost to the company.
5. Long-term incentives. Factor in the value of stock options, profit-sharing plans, or other long-term employee incentives.
6. Employee discounts and savings. Estimate the monetary value of employee discounts on things like company products, services, or partnerships with other businesses.
After assigning a value to each item in the package, create a total compensation statement, which is a personalized document that outlines the full value of an employee’s compensation package. Providing employees with these statements gives them a clear picture of their total rewards, showing them exactly how much their employer invests in their well-being. Total compensation statements can also become recruitment tools to showcase the complete value proposition to candidates during the hiring process.
Frequently asked questions
What are some cost-effective ways to enhance total compensation?
Enhancing compensation packages doesn't always require a major financial investment. There are many cost-effective ways to increase the value and appeal of an employer’s offerings, such as:
Improving work-life balance by implementing flexible work arrangements like remote work options.
Supporting employee well-being by introducing wellness programs like subsidized gym memberships, financial tools, or mental health resources.
Partnering with local businesses to offer employee discounts on goods and services.
Helping employees grow and advance their careers by offering online courses, mentorship programs, or tuition assistance.
How can employers effectively communicate total compensation to employees?
Provide each employee with a detailed total compensation statement that outlines all aspects of their rewards, including salary, fringe benefits, and any other relevant information. Using visuals like charts and graphs presents everything in an easy-to-understand format. Also consider holding regular meetings or offering presentations that explain the benefits package in detail.
Does total compensation differ from full-time to part-time employees?
While
part-time employees work fewer hours, they still make valuable contributions — and they deserve to feel valued in return. That said, creating a total compensation package for part-time workers requires a slightly different approach, such as offering prorated versions of core benefits like health insurance, retirement plans, and paid time off.
How does salary transparency impact total compensation strategies?
Salary transparency — the practice of openly sharing salary information within an organization — is becoming increasingly common. Giving employees access to salary data promotes pay equity and fairness, reducing potential discrepancies and discrimination.
That’s commendable and conscientious, but it means companies need to be strategic in designing their compensation packages. Make sure annual salaries are comparable between employees and competitive within the market. Also emphasize the value of the total compensation package, not just salary, to attract and retain top talent.
Enhance your total compensation package with EarnIn
Looking for a cost-effective way to strengthen a total compensation package? Financial wellness benefits are becoming an essential part of employee support, and EarnIn makes it easy to provide.
EarnIn offers a suite of financial wellness tools, including Earned Wage Access, Credit Monitoring, and Tip Yourself, that empower employees to manage their finances with confidence. It’s simple to roll out, with no cost to employers and no integration required with payroll, time and attendance, or HRIS systems.
With
Earned Wage Access, employees can access their pay the same day they work, starting at just $2.99 per transfer
. They can get up to $150/day, with a max of $750 between paydays
to help cover essentials like gas and groceries, as well as unexpected expenses.
Credit Monitoring gives employees free, instant access to their credit score and insights, helping them stay informed and make smarter financial decisions.
Tip Yourself makes saving simple by allowing employees to effortlessly set aside money with every paycheck.
By offering financial wellness benefits like EarnIn, companies can improve employee satisfaction, retention, and productivity—all while enhancing their total compensation package at no extra cost.
Request a demo today to see how offering financial wellness benefits like EarnIn can improve employee satisfaction, retention, and productivity.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
EarnIn is a financial technology company not a bank. Banking Services are provided by Evolve Bank & Trust, Member FDIC. The FDIC provides deposit insurance to protect your money in the event of a bank failure. More details about deposit insurance
here.
A pay period is the time between your paychecks, such as weekly, biweekly, or monthly. EarnIn determines your daily and pay period limits (“Daily Max” and “Pay Period Max”) based on your income and financial risk factors as outlined in the
Cash Out Maxes section of our
Cash Out User Agreement. EarnIn reserves the right to adjust the Daily Max and Pay Period Max at its discretion. Your actual Daily Max will be displayed in your EarnIn account before each Cash Out.
EarnIn does not charge interest on Cash Outs or mandatory fees for standard transfers, which usually take 1–2 business days. For faster transfers, you can choose the Lightning Speed option and pay a fee to receive funds within 30 minutes. Lightning Speed is not available in all states. Restrictions and terms apply; see the
Lightning Speed Fee Table and
Cash Out User Agreement for details and eligibility requirements. Tips are optional and do not affect the quality or availability of services.
Your VantageScore 3.0 from Experian® indicates your credit risk level and is not used by all lenders, so don't be surprised if your lender uses a score that's different from your VantageScore 3.0.
Learn more.
Tip Yourself Account funds and Tip Jars are held with Evolve Bank & Trust, member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% Annual Percentage Yield and $0 monthly fee service deposit account. For more information/details visit
Evolve Bank & Trust Customer Account Terms. The FDIC provides deposit insurance to protect your money in the event of a bank failure. More details about deposit insurance
here.
Lightning Speed is an optional service that allows you to expedite the transfer of funds for a fee. Depending on the product, the fee may be charged by EarnIn or its banking partner. Lightning Speed is not available in all states. Restrictions and terms apply. See the
Lightning Speed Fee Table for details.
