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Do you use Glassdoor, Payscale or various salary guides to assess whether an opportunity is attractive? While useful, the picture presented on these sites and in these salary guides is not complete. So, to make an informed career choice, total compensation is a more valuable tool than salary.
Let's look at how to calculate total compensation.
Total Compensation Definition
First of all, what do we mean when we use the term total compensation? More than salary, total compensation includes a multitude of components. The elements of total compensation can be divided into three categories: direct compensation, indirect compensation and non-monetary benefits. All companies include elements of each category in their "packages", but the total package can vary for each company, and sometimes even for each level within a company.
So let's start by defining these terms...
Direct Compensation :
This category includes any amount of money paid directly to the employee. This includes salary, of course, but also tips, bonuses, commissions, profit sharing and stocks.
Indirect Compensation :
This category includes all elements that are paid by the employer for the benefit of the employee. This includes benefits such as group insurance, pension plans, vacation, EAPs, etc. Expense reimbursements, electronics or travel paid by the employer are also part of indirect compensation.
Non-monetary benefits :
This category is a little more difficult to define, as it includes all the other benefits of a job. Also known as "non-monetary compensation," it is mostly about working conditions. Flexibility, enjoyment of the job, work climate, work-life balance, growth opportunities and recognition are some of the non-monetary benefits.
Advantages of Calculating Total Compensation
As you've probably noticed, each company offers different benefits and salaries, depending on their overall compensation strategy and internal pay scales. So it's not always easy to compare different opportunities.
That's why knowing how to calculate total compensation gives you a comprehensive picture of the pros and cons of a current job or future opportunity. It also gives you consistent criteria on which to compare multiple opportunities.
If you are not looking for a new job, calculating your total compensation can also be beneficial. When we talk about negotiating with an employer, we usually think about salary. But total compensation includes a multitude of elements that you can negotiate. Knowing how to calculate your total compensation allows you to assess where you could get more.
In addition, this calculation exercise is a good time to question yourself and evaluate what is really important to you in the future. Is a promotion with a better salary what you want, or would more vacation time contribute to your happiness? These questions will influence your decisions in the future.
Total Compensation Calculation
It is difficult to create a mathematical formula to quickly calculate total compensation, as everyone will place varying importance on the different components. For example, one employee might consider salary as the most important aspect of total compensation, while another employee might prioritize schedule flexibility.
To help you calculate, here is a table explaining the different calculations to be made:
Direct Compensation
| Compensation | Amount $ |
|---|---|
| Salary | Since other aspects of compensation are usually calculated annually, it is easier to use your annual salary in this table. If you use an hourly rate for your salary, the important thing is that this measure is the same for all other types of compensation. |
| Bonuses + Profit sharing + Stocks | The value of these amounts in dollars or as a percentage of your salary. |
| Commission + Tip | The value of these amounts in dollars or as a percentage of your salary. |
Indirect Compensation
| Compensation | Amount $ |
|---|---|
| Group Insurance | Group insurance has a value of $750 to $2000 per year for an employee, depending on the type of insurance, the portion paid by the employer, the age of the employee, the number of dependents, etc. |
| Pension Plan | The value of the pension plan depends on the type of plan offered by the employer. It is often a percentage of the employee's salary |
| Vacation + Time off | The value of vacation and time off in dollars or as a percentage of your salary. Usually it is 4% of the salary for less than 3 years of continuous service or 6% for more than 3 years. |
| Other Benefits | The value of these amounts in dollars. |
| Expense Reimbursements, Electronic Devices, Paid Travel, etc. | The value of these amounts in dollars. |
Non-monetary Benefits
| Non-monetary Compensation | Value |
|---|---|
| Enter all non-monetary benefits of the job here | Indicate here the value you attach to each benefit. This can be a monetary value or an order of importance. |
| Total | $ |
|---|
To download the table in PDF format, click here.
Once you have entered all the amounts into the table, you can calculate a dollar total to get a complete picture of a job and its total compensation. But it's not just about comparing the total of the different options available to you. Ideally, if you are evaluating different positions, you should choose 2 or 3 important aspects to base your decision on.
Total compensation is not just a number, and most importantly, it is not universal. Everyone has to make choices based on what they consider most important.
If you're looking for a new opportunity, or if you're not happy with your current total compensation package, check out our Job Offers.
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