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The Best Way To Present Total Compensation Value

The Best Way to Present Total Compensation Value

The value of total compensation can be presented in one of two ways…either “annualized” or “actual dollars”.

Annualized

The “annualized” method does not provide an accounting of earnings and benefits but rather, presents an overall picture of the value of an employee’s total compensation at a particular point in time. This method converts all income/benefit costs to an annual basis and as expected, we do many of the calculations for this type of statement. This method….

  1. provides more flexibility in the timing of statement delivery because it is not tied to fiscal or calendar year-end;
  2. reports cost for the current plan for which an employee is enrolled. (For example, if an employee experiences a life event and changes their medical plan from employee only to employee/spouse, this method reports an annual cost for employee/spouse coverage.)
  3. provides newly hired employees or those hired within the year a total compensation statement that illustrates their “annual” benefits package as opposed to a portion of the year.

Actual Dollars

“Actual dollars” is more of a true accounting or reporting of the cost of earnings and benefits. This method…

  1. is most effective at calendar or fiscal year end;
  2. reports actual, annual expenditures as provided by you for each income and benefit cost per employee;
  3. often coincides with W-2 distribution and can be a good time to show that compensation is made up of so much more than earnings alone.

It really just comes down to your preference. We are well-versed in both methods and our systems are set up to produce accurate statements either way. Our client base is divided with a little over 65% using the annualized method simply because it provides more flexibility in the timing of statement delivery. The data required is virtually the same for both methods with a few exceptions. Give us a call and we can discuss your preferences and answer any questions you may have regarding your statements.

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