When you’re in the final stages of hiring a new employee, you’ll need to present them with a comprehensive compensation and benefits statement. What's the difference between compensation and benefits? Compensation refers to the salary and incentive pay that your company offers, whereas benefits refer to indirect compensation in the form of health insurance, retirement plans, paid time off and more.
Create a package that shows your future employees how much you value them being a part of your business. This will help you to attract desirable talent, retain employees and increase engagement.
Salary and Incentive Pay
Begin your package by outlining the salary for the position. Specify whether there are any performance-based incentives. For example, if the sales representative hits 110 percent of their target, will they receive a five percent bonus? Be sure to clearly outline what the incentive increments are.
In some companies, the incentives are not tied to individual performance, but company performance instead. For example, if your company reaches its revenue target, will each employee receive a bonus? If so, how much?
Medical and Health Insurance Benefits Statement
Health insurance is one of the most important benefits from an employee perspective. In your benefits statement, outline what kind of a plan you offer:
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
- Point-of-Service Plans
- Self Insurance
- High Deductible Health Plan
Also specify whether you cover dental and vision expenses, as these can be of great importance for some families. Take care to specify what your plan covers and what limits exist. Some companies also offer Flexible Spending Accounts (FSA) which help employees to cover out-of-pocket medical expenses.
Employee Retirement Plans
Many employees choose to begin saving for the future well in advance. Employers that offer retirement plans show employees that they care about their long-term success. Attractive retirement plans can actually reduce turnover in your business, which can reduce hiring and training costs.
Outline what kind of retirement savings plan you offer, which may include 401(k)/403(b) or pension plans. Generally, employees contribute a percentage of their pre-tax earnings at each paycheck, and employers match their employees’ contributions up to a certain amount.
Disability and Life Insurance Plans
Short-term disability insurance, long-term disability insurance and accident insurance help employees when they are not able to work for a specified amount of time. Disability insurance helps to cover the bills when an employee is not able to work because of an illness or injury. Accident insurance often covers out-of-pocket medical expenses such as hospital stays, emergency treatment and medical exams.
Life insurance is another valuable benefit to offer employees. In the event of their death, an insurance company pays out a specified sum of money to the employee’s beneficiaries. This is a particularly attractive benefit to employees with children or spouses.
Vacation and Other Paid Time Off
Your benefits statement should outline how much time your company enables employees to take off with pay. This can include:
- Vacation time
- Sick days
- National or state holidays
- Personal days
- Bereavement or funeral days
- Maternity and paternity leave
- Family medical leave
State how much time the employee can take off with pay. Also specify if the numbers increase as the employee gains seniority within your company. For example, if the employee starts off with two weeks of vacation and three sick days, will that increase to three weeks of vacation and five sick days after three years of employment? This is an incentive to reduce turnover and increase engagement for employees.
Other Benefits to Consider
If you’re looking to hire top talent at your company, there are a number of other benefits you can consider offering in your compensation and benefits statement:
- Educational assistance programs
- Relocation expenses
- Learning and development programs
- Career-advancement opportunities
- Sabbatical opportunities
- Home phone and internet reimbursement
- Flex time and telecommuting
- Pet insurance
Anam Ahmed is a Toronto-based writer and editor with over a decade of experience helping small businesses and entrepreneurs reach new heights. She has experience ghostwriting and editing business books, especially those in the "For Dummies" series, in addition to writing and editing web content for the brand. Anam works as a marketing strategist and copywriter, collaborating with everyone from Fortune 500 companies to start-ups, lifestyle bloggers to professional athletes. As a small business owner herself, she is well-versed in what it takes to run and market a small business. Anam earned an M.A. from the University of Toronto and a B.A.H. from Queen's University. Learn more at www.anamahmed.ca.