Should HR Give Employees ‘Hidden Paycheck’ (Total Compensation) Statements?

Do you know how much total compensation* you pay each employee? Do your employees know what their total rewards are? Many companies do not give employees ‘hidden paycheck‘ statements. Here are the pros and cons of giving your employees their ‘hidden paychecks.’

When meeting with a client’s employees—usually at a time when employees are contemplating unionization—it is always fascinating to find how many employees do not know what their total compensation is worth.

Even more fascinating, though, are those human resources professionals out there who either wait until they are in the midst of a union organizing campaign to provide the information to employees, or those who have never even considered sharing the ‘hidden paycheck‘ with employees.

What is ‘total compensation‘ (aka the hidden paycheck or total rewards)?

“Total compensation is everything the company provides an employee in exchange for working,” according one small business resource site. “It includes base salary, bonuses, benefits, perks and on-site amenities. [Emphasis added]”

[The key here is the term ‘everything,’ which are such things as the cost of paid lunches or breaks (whether or not they are required by law) dental or eye care insurance, disability insurance, life insurance, on-site day care, ESL classes, tuition assistance, etctera.]

Thankfully, there are some companies that do a great job in sharing information with their employees—including on topics like total compensation.

Because companies with good employee communications are generally more impervious to union organizing, as a result, they are not the types of companies that need outside help with labor problems.

The pros and cons of sharing the hidden paycheck…

The Pros of the Hidden Paycheck:

This BenefitsPro piece is a great place to start:

Paychecks pay mortgages, buy food and make vacations possible. But what about the other parts of their compensation? For employees, these benefits are often overlooked and forgotten, and it’s up to employers to step in and remind employees of the full value of their compensation packages.

Total compensation statements are a great way to do so. They typically include the overall value of an employee’s financial rewards, medical benefits and less-tangible benefits like flexible work arrangements and continuing education opportunities.

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Next to direct pay, benefit expenses are typically the second largest payroll expense. We call the value of these benefits the “hidden paycheck” because employees rarely think about what it costs their employer to provide. When employees see their statement that highlights this hidden paycheck they and their family can immediately see the whole value your company is providing them and their family.

Total compensation statements provide HR teams with an opportunity to communicate with employees about their benefits and to showcase just how much the company has invested in them. This has a number of positive effects, such as helping HR teams to attract, motivate and retain employees.

What the Benefits Pro piece does not state is that Hidden Paycheck statements are an excellent tool to from a union avoidance standpoint.

If employees know the total amount they are being paid by an employer, they are generally less inclined to risk losing it with letting a union into their workplace and gambling it away in negotiations.

Below is an example of a ‘hidden paycheck’ prepared by a benefits firm for a fictitious employee.

While the above example shows an employee’s base yearly salary (and is too limited as well), for hourly employees it is often better to break each item down to an hourly amount. [For assistance with this, email here.]

One of the best ways to distribute the ‘hidden paycheck’ to employees is in person.

Human resources should meet with employees in small groups to explain how to read their individual ‘total rewards’ statements.

This also gives HR a great way to gauge employee sentiments, identify compensation or benefit issues, as well as gather feedback on any other issues.

In summary, giving employees their ‘hidden paychecks’ is an extremely effective way of…

• Expanding communication with employees;
• Informing employees of their true worth to the organization;
• Helping to retain good employees
• Letting union-free employees know what’s at risk were they to unionize.

The Cons of the hidden paycheck…

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* Note: The terms ‘total compensation,’ ‘total rewards,’ and ‘hidden paycheck‘ have been intentionally used interchangeably throughout this post. For the rationale in doing this, you can email us here.