Most business owners aim to create work environments that attract and retain the best talent. One way to achieve this is by offering competitive employee compensation that reflects the current market trends as well as the company’s financial situation.

However, finding reliable information on different types of employee compensation benefits can be a challenge. The information is typically scattered across various reports and articles all over the internet, making it difficult to collate data. That’s why here at Business2Community, we’ve curated the latest tips and statistics to help you determine what fair compensation looks like.

Employee Compensation Statistics Highlights

  • In 2021, 63% of US employees looking to leave their current company did so because they needed to “make more money”.
  • In 2022, 59% of US workers who’d started a new role in the last six months were actively looking for new opportunities.
  • It costs up to 2x an employee’s salary to replace them once they leave.
  • Employees who can work remotely are 13% more likely to stay in their current job for the next five years.
  • The majority of workers in the US say employer-sponsored health insurance and PTO are “extremely important” to them.

What Is Employee Compensation?

Employee compensation is the combination of salary, benefits, bonuses, and other perks businesses offer to attract and retain talent. This package is designed to compensate employees for the work they do.

Sometimes, HR professionals refer to compensation as direct and indirect. Typically, direct compensation is monetary in nature. This may include:

  • The basic salary
  • Overtime pay
  • Commission
  • Bonuses

Indirect compensation refers to benefits and other perks that may or may not be monetary in nature. This can include:

  • Stock options
  • Health insurance
  • Disability and life insurance
  • Pension plans
  • Paid time off
  • Remote and flex-time policies
  • Parental leave
  • Company cars, laptops, phones

The total employee compensation and benefits offered to an employee consist of direct and indirect compensation types. The good news is that many of the benefits employees value don’t necessarily come at a high financial cost to employees.

A 2023 Pew Research survey found that most employees valued paid time off for vacations more than health insurance or employer-sponsored pension plans.

Paid parental leave was also highly valued. The chart below, courtesy of Pew Research Center, expands on this further.


Let’s take a look at some of the key components of a compensation package and how effective they are.

Base Pay

An employee’s base pay is the salary they receive before accounting for any benefits. While non-monetary benefits are becoming more important to employees, a good pay packet is key to attracting and retaining staff members.

A 2021 survey involving 750 workers in the US found that 7 in 10 current employees are open to new opportunities, and approximately 63% said it’s because they “need to make more money”. This was, by far, the most popular reason to look for new opportunities among those surveyed.

A 2022 Gallup survey involving more than 13,000 US employees found that 64% of workers are looking for a significant increase in income or benefits when reviewing compensation offers.

Workers realize they’re in a job seeker’s market, and they’re using this as an opportunity to get more pay for their work.

Health Insurance

Health insurance is seen as a priority for many employees.

In 2023, 51% of employees in the US saw employer-sponsored health insurance plans as “extremely important”, while 28% said it was “very important”. Only 8% said it was “not at all important” to them.

Health insurance is particularly important to members of the Boomer and Gen X generations.

In 2022, 88% of Boomers surveyed said employer-sponsored health insurance was a “must have” benefit and 89% of Gen X employees said the same.

Only 4% of Boomers and 3% of Gen X employees said health insurance is “not needed”.

A 2023 Pew Research report found that 62% of workers say it’s “extremely important” to them that their workplace offers paid time off for vacations and sick leave.

And 27.3% said this is “very important to them”. Only 3% said having paid time off is “not too important” to them.

As such, paid time off is a key benefit that most employees expect in some form or another.

But it’s worth noting that as of 2023, four in ten employees in the US don’t use all of their allotted vacation days.

There are many reasons for this, but some key factors that affect how many days employees take off include:

  • Worrying they might fall behind
  • Worrying about co-workers having to take on additional work
  • Worrying they might lose their job

The table below expands on this trend in more detail.

Remote and Flex-Time Policies

Remote and flex-time policies have been gaining traction in the wake of the pandemic. Implemented properly, remote and flexi-time arrangements can have a positive impact on employee attrition.

In 2023, companies that offered remote work had a 25% lower turnover than companies that didn’t offer any type of remote work.

Also, remote workers are 13% more likely to say they’re planning on staying with their current company for the next five years.


The Importance of Employee Compensation

In 2022,52% of new hires who joined their company within the last three months said they were already actively looking for a new job.

US businesses lose $1 trillion in voluntary turnover every year. On average, it costs up to two times an employee’s salary to replace them once they have left. But, a focus on employee compensation can tackle high turnover.

In fact, 75% of employees said they’re more likely to stay with their current employer if they’re happy with the benefits on offer. And 69% of employees said they’d choose one job over another if it had better benefits.

However, only 52% of men and 46% of women were “extremely or very satisfied” with their benefits as of 2023. Also, only 39% of men and 30% of women were “extremely or very satisfied” with how much they’re paid.

Employees on higher incomes are more likely to say they’re “extremely or very satisfied” with their job overall. They’re also more likely to be satisfied with their benefits package.

Workers on lower incomes are less likely to have access to standard benefits like paid time off, health insurance, and retirement programs.

The majority of workers who changed jobs in 2021 did so because of low pay (63%) or because of benefit-related issues such as childcare issues (48%) and overall dissatisfaction with the benefits on offer (43%).

It’s clear that employee compensation is a key driver in retention.

How to Determine Employee Compensation

Determining employee compensation is a careful balancing act that involves several steps. While money talks, there are ways to attract top talent even if you don’t have the budget to pay significant wages. In this section, we’ll discuss some of the key steps that employers can take to work out competitive packages for their staff.

Carry out Market Research

Start by looking into the current market trends for the roles you’re hiring for, as well as the industry and location. Market research can help you work out the average salary for the position, which can be a strong starting point for creating your overall compensation package.

Evaluate Your Budget

Look at your company’s financial situation to determine how much you can afford to pay employees. Your budget, along with your market research, can help you determine the salary range for a particular role.

You might find that your budget doesn’t stretch far enough to offer a competitive salary. However, it’s possible to bridge that gap with other benefits.

Consider Non-monetary Benefits

Non-monetary benefits can be a great way to attract top talent if you don’t have the budget to pay for above-market salaries. Most employees want some form of PTO, for instance. In fact, a recent survey found that employees would rather have unlimited paid time off rather than subsidized tuition fees, child care, or free office snacks.

Companies like Netflix, Microsoft, and Dropbox all offer unlimited PTO, and well done well, this can be beneficial to employers and employees alike.

netflix vacation policy

However, policies like this can be a double-edged sword. A 2018 survey, for instance, found that employees who had unlimited time off actually took less time off than employees with a set number of days. As such, while certain non-monetary benefits can be a great way to attract employees, it’s important to ensure the policies work well so talent can be retained as well.

Look at the Employee’s Experience and Skills

An employee’s experience and skills are key to determining compensation. As you might expect, more experienced employees with advanced skills will usually command a higher salary but will usually be able to hit the ground running and make an impact quickly. A less experienced employee may be willing to accept a lower salary, particularly if there are opportunities for professional development and progression.

In fact, 94% of employees will stay longer at a company if professional development is offered, making it a cost-effective long-term plan to offer training in general.

Evaluate the Total Employee Compensation Plan

Before you extend an offer to your candidate, you need to evaluate your total compensation package. Look at the salary you’re offering as well as the other benefits you’re including to ensure it’s competitive and attractive. If the candidate has mentioned a particular benefit is important to them, look at whether you can enhance this in some way to make your offer stand out.

The Future of Employee Compensation

As the workforce continues to evolve, so too will employee compensation priorities. Flexible work arrangements, remote work options, and paid time off may become even more popular.

In 2022, 8 in 10 workers said a flexible schedule was important when considering a new job, while 70% said remote work was a key factor. And over 70% of Gen Z and Millennial workers said unlimited PTO was an important benefit when reviewing job offers.

Employers who are able to offer flexibility are going to find it easier to attract and retain top talent in the future.


What is meant by the compensation of employees?

What is the definition of compensation?

How do you calculate employee compensation?