“What’s my compensation package?”
Simple question with a not so simple answer.
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Total cash.
Total compensation.
Total rewards.
Total confusion.
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Keeping a consistent narrative around compensation for a team of four?
Easy.
For a global team of managers, HRBPs, and recruiters?
Keeping that narrative tight and consistent… not so easy.
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So, here’s what it looks like, let's break down each, one-by-one.
Step 1: Total Cash
Total cash is typically limited to pay that immediately hits the bank account of an employee.
It’s the most basic form of “total” anything. Most commonly, it includes things like:
- Base salary
- Recurring bonuses
- Commission or variable pay
- Spot bonuses or other one-time bonuses
But this is really only part of the package. The talent market has become intensely competitive, so most companies go far beyond “what hits the bank,” which brings us to…
Step 2: Total Compensation
Next up, total compensation (also known as Total Direct Compensation or TDC). It includes everything in total cash with one major kicker: equity.
In a world where a FAANG company might offer a salary $50K above market, many companies lean on the potential upside of an exit (private) or a quarter-over-quarter earnings growth (public).
The communication of the equity will commonly include:
A summary of Net Grant Value
- The gross grant value calculated as number of shares x most recent preferred price
- Less, the cost to exercise calculated as number of options x strike price (not applicable for RSUs)
An explanation of how vesting works.
A framework to think through what your equity could be worth in an exit.
You’ll want to be extra careful when communicating with candidates and employees that equity isn’t guaranteed cash (hence, why it’s not part of total cash).
Strike prices need to be board approved, stock prices can fluctuate, and dilution are just a few events that can influence what someone’s equity is actually worth.
Step 3: Total Rewards
At last, we’ve arrived. Total rewards.
Total rewards is the most extensive of the ‘total trio’ by adding benefits into the mix.
If you’ve ever gotten a COBRA letter, you know the price of healthcare alone can be absurd. But benefits are often the most undersold elements of anyone’s rewards package.
Most teams quantify the common benefits like:
- Healthcare / Dental: Company contributions to premiums.
- 401(k): Company match and costs of maintaining the plan.
- Stipends: Phone stipends, commuter stipends.
Our customers include the more abstract benefits, which can often be harder to quantify including:
- Parental Leave: Time off with the newborn!
- Mental Health: There’s no price tag on keeping yourself happy and healthy.
- Unlimited PTO: Giving our team the freedom to take PTO whenever they need it.
Closing Thoughts: Where the talent market is moving
The companies that will win the talent battles are the ones that can build and communicate a robust, complete package from equity, to salary, to bonuses, to benefits.
And naturally, we help customers do that too.
Learn more about Pave’s end-to-end compensation platform
