Total Compensation Statements, a Total Headache?
by Cheryl White, Senior Associate
Posted on February 3, 2022
Total compensation statements are all the buzz in the payroll and human resources world of school districts with new legislation requiring districts to furnish these statements annually to their employees. With all the discussion about total compensation statements, it seems many of us have more questions than answers. So, we are here to break it down and get you some answers.
A total compensation statement is a way for employers to demonstrate the value of an employee’s total compensation package. An employee’s total compensation consists of money earned for the work performed by the employee, as well the employer’s cost to provide benefits to an employee and his or her family. Arizona Revised Statute now requires the governing board of a school district to provide its employees a total compensation statement that is broken down by category or benefit for each fiscal year (see A.R.S. § 15-341(A)(45)(a-g).) This statute further details the minimum required components districts must include in each employee’s total compensation statement.
These required components are:
- Base salary and any additional pay – pay earned by the employee for work performed
- Medical benefits and the value of any employer-paid portions of plan premiums – employer paid health premiums, i.e. medical, dental, and vision
- Retirement benefit plans, including social security – employer paid ASRS contributions and other voluntary employer paid retirement contributions and employer share of social security
- Legally required benefits – employer share of Medicare and any other legally required employer paid benefits, as applicable
- Any paid leave – employer paid leave
- Any other payment made to or on behalf of the employee
- Any other benefit provided to the employee – employer paid life insurance, all other employer paid voluntary benefits, including fringe benefit stipends
Let’s dig into a few more details. This requirement is effective beginning fiscal year 2021-22. As the statute states, the pay and benefits included in the total compensation statement are to be presented for a fiscal year rather than a calendar year. The statute itself only dictates that a total compensation statement must be furnished and what minimum components are required to be included without addressing many questions we all have regarding how to execute complying with this new requirement.
The following are some of the most common questions we have received regarding total compensation statements along with useful answers to guide you in your implementation journey.
Q: What is considered base salary and additional pay?
A: All wages paid to an employee to include position, stipends, extra duty, performance pay, etc.
Q: When reporting pay on the total compensation statements, do we report gross pay or net pay?
A: Gross pay is reported on the total compensation statement.
Q: What are some examples of employer paid benefits that would be included?
A: Some examples include: health insurance premiums, dental insurance premiums, vision insurance premiums, teledoc.
Q: What are examples of other benefits provided?
A: Some examples may include life insurance and education assistance.
Q: What exactly is required to be reported for the paid leave component? Are we reporting the value of the employee’s available leave balance? Are we reporting the leave balance in units or dollars?
A: The paid leave component requires that a district report actual leave paid to the employee during the fiscal year, which is reported in dollars.
Q: Do we furnish total compensation statements at the beginning or end of the fiscal year? Is there a deadline by which to furnish these statements to employees?
A: While the legislation does not specify, as a best practice, total compensation statements should be furnished to employees at the end of the fiscal year. The statute does not impose a deadline by which to furnish to employees; however, we recommend furnishing total compensation statements to employees as soon as possible after the last posted payroll of the fiscal year.
Q: Are total compensation statements required to be furnished in hard copy, or can they be furnished electronically?
A: As the statute is silent in regard to what means may be used to furnish total compensation statements, they can be furnished either in hard copy or by electronic means, so long as each employee receives a statement including, at minimum, the components required in statute.
Q: Are total compensation statements required to be furnished for all employees, including part-time, or only for full-time employees?
A: Total compensation statements are required to be furnished for all employees receiving any kind of pay or benefits from the district during the fiscal year, regardless of full-time or part-time status.
Q: Are statements required to be furnished for terminated employees? When are we required to furnish them, at the time of termination, or at the end of the fiscal year?
A: If the terminated employee received any kind of pay or benefit from the district during the fiscal year, a total compensation statement must be furnished for the employee. As the statute is silent on when the statement must be furnished, it is up to the district’s discretion to furnish at the time the employee terminates or at the end of the fiscal year to furnish all statements in one batch, so long as a statement is furnished.
Q: How do we document that we have furnished total compensation statements to employees in order to demonstrate we complied with the statute?
A: While statute does not specify, like other compliance requirements, it is always important to document compliance. Some strategies may include: document method of disbursement, have employees sign an acknowledgement that they received, maintain copies of what is published/provided.
Being armed with more answers and less questions can certainly make the implementation process of complying with a new requirement less painful. Our goal at HeinfeldMeech is to provide you with these answers and relieve those headaches!
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