Employee benefits have a direct relationship with total workers’ compensation. This compensation has to do with the fact that the greater the volume of benefits received by the employee, the greater the labor compensation.
We will see why this relationship is relevant and how it affects both the employee and the company.
When discussing employee benefits, we refer to many areas and fields. It can range from the most common ones, such as vacation days, to other options such as full health insurance, dental insurance, the possibility to work remotely, etc.
Benefits are a good incentive for the employee when choosing a company to work for. For the company, the relationship between employee benefits and total compensation per job, known as TEC, is also important.
Why TEC is important
Total Employment Compensation (TEC) is the name given to the compensation package that employers offer to workers. It is related directly to the services provided by the worker.
Within this type of compensation, we find the salary, including the total income, but also the cost in dollars of the added benefits offered to the workers. Therefore, all the additional costs to the salary included within the benefits are incorporated.
We have mentioned some of them above, but there are many more, such as health care, leisure, recreation, profit sharing, retirement plans, bonuses, etc.
A high TEC is generally considered to imply that the company offers many additional benefits to the employee. Typically, this is used not only to create a good working environment but also to improve talent retention and the attraction of new candidates.
On the other hand, especially in large companies, the sum of the TEC costs is used to calculate the actual cost per employee.
How total workers’ compensation impacts the business
The first factor to consider is that, because real workers‘ compensation encompasses more than just the fact of salary payment, it will always be affected by benefit costs.
Although it may depend, total rewards are generally considered to show positive company issues such as effective management programs. It should note that many workers, especially at middle and senior levels, will always place a high value on both benefits and packages. That, which is always important for companies, can be vital in new business ventures.
On the other hand, TEC is increasingly being used as a key element in company communication. Logically, showing the benefits of working in a company offers a positive aspect and improves the overall image, not only from the point of view of attracting employees but also globally and socially.
Who calculates the TEC?
That is an interesting aspect. No ideal calculation or concrete figure can ensure success in this business operation.
In general, there is a trend that says that the cost of fringe benefits should be around 30% of the wage cost. However, this is still a trend and a tendency. Some companies contribute less to benefits and maintain excellent policies in this regard.
Logically, the company’s labor compensation calculation must be based on a serious analysis of its economic resources. Adding a high cost overrun cannot assume and lead to major cash flow problems makes no sense.
Among the elements considered in this calculation is not only the monetary value of the shares (although it is important). Knowledge of the company, the resources available, the social environment, and the workers’ demands is vital.
It is necessary to think that, depending on the profiles, for a group of workers, the dental insurance that includes their family can be determinant, but for another group, it can be equally determinant incentives destined for trips or vacations.