Tuesday, June 14, 2005

Total Comp Statement Implementations

Regina had this to say about total compensation statements (TCS) and branding. I absolutely agree. However, I wanted to write about some of the technical considerations around TCS as well. We all know that implementation for any system is never as simple as it should be.

Ideally TCS should be composed of ALL the elements of your compensation package AND overhead components. This means that cash compensation, employer paid taxes, benefit premiums, time off, 401(k), defined benefit plans, ESPP, ESOP, relocation, training costs, etc... should make an appearance. Not all of these costs need to make it to the employee bottom line. You don't want the employee thinking you're artificially inflating the total comp number, but you do want the employee to know if you are spending a significant amount of money on (say) training.

So now we have a few components to work with. The next problem is acquiring the data needed from disparate systems. Anyone who has ever tried to get a consolidated report knows how hard this can be. Keep in mind, not only are you trying to get data, you need a file feed, in a specified format, and that data needs to be scrubbed prior to feeding the TCS. As I'm sure Regina would agree, no point communicating your brand if you do it wrong.

So now we have data, and we think it's been scrubbed. Your next step is to provide appropriate calculations. You probably don't want to do this without your actuary for the DB plans, but for things like 401(k) plans and cash balance plans, put in a few assumptions for growth (your salary will grow by 4% a year, investment balance will grow at 6% and inflation at 3%). Therefore, an employee knows what the potential balance of retirement funds looks like at age 65.

Now we need a website. Perhaps you have a self service or portal technology that will support this for you. Hopefully you are not building this from scratch, although if you are, you might have more flexibility. The site should have all the standard security features on it, but you might make it cool with some employee modeling capability. (for my 401(k), what happens if the my salary grows at 6% and investment returns are 10%, and I retire at 55?) one of the key points I want to drive home is that we've talked about a fair amount of complexity. Now that we're using an on-line TCS, much of this complexity is going to be repeated every month, or however often you allow the TCS to be updated.

If this all seems like too much, start small. Many vendors (outsource benefit vendors or software and ESS vendors) provide canned TCS right out of the box. More complexity means more cost. You can start with basic cash compensation and benefit costs, add 3rd party interfaces from retirement plans later, and add cool graphics web sesign after that. It might start out at $20K or you can spend $500K. The point is that it's a fabulous opportunity to communicate your value to your customers.