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Wage & Benefits Statements

The year-end W-2 shows only a part of the total “dollar and cent” value an employee gets from their job. Calling attention to the overall gross and net pay to the employee – and employment costs to the employer is well worth the time and effort. A Wage & Benefit statement contains information you normally don’t see on your pay stub…also know as “the hidden paycheck”. This statement includes the base salary, as well as every benefit or perk the company provides. Basically, it’s a complete overview of the total compensation package.

Most companies provide a wage & benefit statement when you first start working so you can see what your base salary will be after certain deductions have been met. However, these statements are not provided on a routine basis so employees tend to lose sight of their total compensation package. They have bills to pay and are mainly focused on their base salary and rarely consider the expense of general benefits and/or fringe benefits that may be calculated into their total comp package… which is so much more than what’s printed on the check or direct deposit slip. So, from time-to-time it’s a good idea for employers to remind employees exactly what’s in their compensation package and how it all breaks down to their base wage.

Breaking it down –
First, consider the annual (exempt) or hourly (non-exempt) salary. Then include any paid time off (PTO), such as vacation, holiday, sick time or personal time. By calculating the PTO, the employee can see what they’re getting paid for not working. The total sum of these numbers will show the employee their gross pay which is what they see on their W-2 at the end of the year.

Second, provide an overview of requested or required deductions from that gross pay. The required deductions include withholding taxes for federal, state, and social security. Requested deductions may include the employee portion of insurance premium and/or retirement plan. These deductions can also include other fees, such as union dues. When all deductions are subtracted from the gross pay, the employee is left with their net pay, which is their take-home pay via a check or direct deposit.

Once employees see the breakdown of their gross pay and why their salary is what it is, show them what the company is paying for employing them. Company paid benefits and taxes include: withholding taxes for federal, state, social security, unemployment and workers’ compensation. A majority of employees think they’re the ones paying these taxes through their gross wages. They don’t realize that employers are also required to pay a percentage of these taxes on their behalf.

Other payments made by employers may include health insurance premiums, life insurance premiums, retirement contributions such as a 401(K) plan, and any other general or fringe benefits the company provides to employees.

It may be a good idea for Human Resources to have small meetings with groups of employees to discuss and explain these wage statements. By explaining this outline, HR is not only showing employees how their take-home pay is calculated, but also lets them see the company-provided benefits and matching contributions the company pays. This effort will help HR address payroll questions and concerns, as well as show the employee how much the company appreciates them.

Check out a sample form available in Word or Excel.

EAF responds to hundreds of hotline calls and emails monthly. We would be happy to answer any interesting questions you may have too! Contacts us at [email protected] or 407.260.6556

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Employers Association Forum, Inc.
640 E State Road 434, Suite 3100
Longwood, FL 32750

Phone 407.260.6556 Fax 407.260.2876
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EAF provides information about current developments in labor and employment law. This information is intended for educational purposes only and should not be considered legal advice. Questions requiring legal advice should be addressed to the attorney of your choice. EAF members may be able to obtain a legal interpretation through our FREE Legal Hotline.