Thursday, December 10, 2015

Compensation & Benefits - The Whole Picture

Very often employees think of their compensation as their base salaries plus bonus, incentives, or commissions.   Worst yet, employees look at what they are paid as take home pay because that is what they have to spend on the necessities of life.  The problem is that this is far from the big picture for the employer.  On top of these monies, many employers are subsidizing, or paying for the full amount of various benefits like medical, dental, disability, Workman's compensation and unemployment insurance, in addition to Social Security and Medicare contributions.   So, on top of base salary and other compensation, adding these other benefits into the picture often adds another 25 - 45% of total salary to formulate what is called the "load factor".

But there is more.  Vacation, holiday, sick time, other paid time off is not free either.   These benefits cost the company money.   Obviously, when employees are not at work; but are being paid as though they are, the company is not getting the benefit of the fruits of their labor, which impacts the ability to provide goods and or services to customers and or clients to generate revenues.  

Employees rarely see the big picture related to compensation and benefits.  To be sure, a married employee, with family that receives $65,000 in salary is actually costing a company well over $90,000.  And, that does not include the full cost of maintaining that employee related to management, rent, phone, computer etc., which may add another $35,000.  So when all is said and done, a $65,000 employee, fully loaded may in fact cost a company $125,000.  

In order for a company to be profitable, revenues must be generated over and above this fully loaded cost.  As such, it is really, really important for employees to understand the full cost of their compensation and benefits and not take any of this for granted because a lot of these benefits are discretionary.  What they receive in their paycheck every two weeks, or monthly is only part of the picture. 

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