Understanding Total Compensation
Today we’re halfway through Women’s History Month and with Equal Pay Day falling yesterday, it’s a perfect time to talk about compensation and total rewards. But first, what is Equal Pay Day?
Equal Pay Day is a symbolic day dedicated to raising awareness of the gender pay gap. In the United States, this date symbolizes how far into the year the average woman must work in order to have earned what the average man had earned the entire previous year.
The exact day differs year by year.
While this is a tangible way to see the pay gap between genders, we also need to look at Equal Pay Day through an intersectional lens. More differences in the pay gap are present when race and disability are taken into consideration. Asian American and Pacific Islander Women’s Equal Pay Day will be on May 3. Black Women’s Equal Pay Day this year will be recognized on Sept. 21. Unfortunately, for full-time Black women workers, the 2022 median wage actually went down compared to the 2021 Black women median wage despite the fact that the pay gap shrunk for White women. Finally, Latina Women’s Equal Pay Day won’t occur until Dec. 8.
Equal Pay Day considers what women make to a man’s dollar but another way to look at wage is to look at total compensation. Total compensation is so much more than your hourly wage or salary and is just as important to consider when looking at pay equity.
So what is total compensation?
Total compensation (also known as total rewards) includes everything you earn in your job and can include perks like professional development, health benefits, vacation/paid time off, profit sharing, and more; it’s important to take all those factors into consideration when evaluating a job offer or negotiating a raise. When you’re evaluating a job offer or a raise, it can be easy to make a gut decision based solely on the hourly wage or salary being offered and your sense of the job/boss/company but you do yourself a disservice by doing so, especially if you have competing offers.
You may be thinking “When you’re thinking about total rewards, what exactly are you taking into consideration?”
Well, there are two types of earnings to consider, financial and nonfinancial. Financial compensation is what many people traditionally consider when evaluating an offer – wage, commissions, bonus potential; but also benefits like disability insurance, sick leave, paid time off, health/dental/vision insurance, tuition reimbursement, and pensions (among other options). Nonfinancial compensation is a bit harder (and more personal) to evaluate. These include things like: work culture, job enjoyment, growth potential, recognition, flexible scheduling options, work-life balance, commute time, amenities, training/professional development, and more.
Calculating total compensation can be pretty straight forward until you start to get into nonfinancial rewards. But a great place to start is:
Yearly base pay + employer contribution to insurance plan(s) + commission/bonus potential + Paid Time Off (vacation/sick/other) + 401(k) contribution + other amenities (gym membership/free lunch/parking permit/tuition reimbursement, etc.)
*this is less scary than it looks!
Once you have the financial total compensation calculated, you can either put a financial value to the nonfinancial rewards (for example, how much is it worth to you have to a short commute?) or you can consider the non-financials from a value perspective to determine whether the financial compensation + your sense of the nonfinancial rewards hits a level that appropriately compensates you for your work.