The Employee Compensation Package: What to Include and Why

An employee compensation package is everything employers provide to employees for the work they do. Here’s a breakdown of desirable items to include and why.

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Do you know what job seekers want when it comes to total compensation packages? A total compensation package goes beyond your new hires’ base pay rate. It also includes items like health insurance, bonuses, and paid time off. By offering competitive employee compensation, you can attract and retain talent who will help your business thrive. In this article, we’ll cover some of the items it’s wise to consider when putting together your employee compensation package.

What is an employee compensation package?

An employee compensation package is everything that you provide to your employee for the work they do for your company. This includes monetary compensation and benefits and other perks that are nonmonetary. Traditionally, these refer to salary or hourly wages, health insurance, paid time off, and retirement accounts, like pensions and 401(k)s. More recently, compensation trends have begun involving things like office equipment and the ability to work remotely.

What do employees look for in a compensation package?

Employees today are looking for salaries or wages that cover their cost of living so they are not struggling with day-to-day expenses. Other top priorities include:

  • Bonuses or commissions.
  • Childcare reimbursement.
  • Flexibility.
  • Health insurance to include medical, dental, vision, mental, and disability coverage.
  • Paid time off.
  • Retirement savings.
  • Training and education.

Common things to include in an employee compensation package

When it comes to creating a total compensation package, it’s a good idea to include more than the standard fare. By going above and beyond, you are showing your employees that their hard work matters and their time is valuable.

Base salary

An employee’s base salary should take into account their education and experience levels, the average compensation for the position, and cost of living in your company’s area. This helps ensure that your employee has the funds they need for everyday expenses and to save money for any unforeseen emergencies.


To help family members with children, consider offering onsite childcare or monetary stipends for parents to afford off-site childcare.

Disability and life insurance

In addition to medical insurance, many companies offer disability and life insurance. Disability insurance helps if an employee is temporarily or permanently disabled while performing or as a result of their job. Life insurance helps pay for funeral expenses as well as other survivor expenses if the employee dies.

Employee discounts

Consider offering employees discounts on your products and/or services. This is especially helpful if your business is in the retail, grocery, or restaurant industries. But other types of businesses can also benefit by providing discounts to employees. This has the added advantage of encouraging your employees to try your products and services. If they like them, they’ll be more likely to recommend them to others in their circles.

Flexible hours

Many employees are now looking for jobs with flexible hours. This could mean flexible daily start and end times and flexible days. For example, if an employee needs to take a Tuesday off, they can make up that day on Saturday. Flexible scheduling can also mean offering employees the ability to work remotely, in person, or a combination of both. It can also ease stress and help facilitate workable solutions when unpaid medical leave is necessary.

Holiday bonuses

If your company did well for the year, you can reward employees for their role by sharing some of the profits as a holiday bonus. This form of variable cash compensation can help employees pay for trips to visit loved ones or purchase gifts or extra food.

Medical insurance

Offering medical, dental, vision, and mental health insurance is fairly standard and expected by most employees. You can make this more affordable and flexible for your employees by offering tiered options, as younger employees don’t always want as much coverage as elder workers.

If you want to go above and beyond, you might consider offering health insurance cost reimbursement. That helps employees better afford medical coverage and pay for physicals and other preventative health appointments. Other employee support services include employee assistance programs for help with personal challenges that can adversely impact their work lives.

Office equipment

For employees who work hybrid or remote, you can provide office equipment or a stipend toward furnishing their home office. This can help employees be as productive at home as they would be in the office. In some cases, work-from-home employees are even more productive than they were in-office only.

Paid leave

Regardless of how your employees work, don’t forget about paid leave. Paid leave can apply to personal days, vacation time, sick time, parental leave, and medical leave.

Retirement accounts and stock options

Support your employees’ retirement planning by helping them save. This can include providing employees with a pension, 401(k) accounts, and stock options. When possible, many employers also contribute to or match employee retirement savings contributions.

Training and education

Invest in your employees’ futures with training and education benefits. This can mean sending them to professional conferences or classes at a local university and perhaps also providing the accompanying professional development materials. Also consider tuition reimbursement for employees in pursuit of a new degree.

Attracting the right candidates to your company and retaining them starts with providing competitive direct compensation. But it doesn’t end there. To show your employees that you value their time and effort and want them to succeed, create a total compensation package that goes beyond the employee salary. This can mean providing ample paid time off, holiday and performance bonuses, professional development opportunities, and help saving for retirement. Proper compensation management will matter as well, so keep HR personnel well versed and trained or consider outsourcing your benefits administration.

For more on employee compensation packages, including total compensation package examples, see our guide on how to create your company’s compensation plan.

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