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More than Base Pay - What is Total
Rewards ?

Spano Pratt Executive Search
by: Rose Spano Iannelli, SPHR
Partner

Total Rewards Includes
 Base Pay (Salary) - Most employers subscribe to a grading system
that places their jobs within a range. If the negotiations fall outside the range, it may be
necessary to re-grade the job and perhaps enhance the position as a result. If a candi-
date is coming into the job at a higher rate than other’s in similar roles within the com-
pany it is referred to as “compression” and may create a problem. Additionally, if the
candidate is coming into the job at the highest rate possible but still within the grade, it
is referred to as “red circled” and does not allow for increases without job expansion.
 Sign On Bonus -this practice is designed to offset the risks of any
change. It will typically apply only to passive candidates, as the risk of accepting a new
role is not as great to an unemployed or active job seeker. Sign on bonus language in
an offer may state monies be refunded if a termination occurs in the first 12 months.
Employers view sign on bonus as a way to offset expenses or lost income such as profit
sharing, yet to be paid bonus, anticipated raises, etc…

 Incentive Stock Grants -This is an option to purchase stock at a
particular price after a particular date. (usually several years away). The incentive as-
sumes the stock will rise in value above the option price. No income tax is due upon
purchase. Stock value may rise and fall with time and options are therefore not guaran-
teed to add value to the compensation package. Stock options that are falling are typi-
cally referred to as “being under water” and have diminishing value.
 Grants - Public companies often utilize equity or stock as additional compen-
sation. Grants are more common than options due to the change in accounting rules
(SOX). The new employee that receives stock grants will be liable for income taxes
based upon the market value at the time of the grants.

 Vacation and Paid Time Off (PTO) - Executives are
considered to be working in positions that may require additional time off in order to re
energize themselves. Therefore the higher the level, the more vacation time typically
granted. Most organizations will offer 3 weeks or greater. However, it is not uncommon
for many executives to request 4 weeks or more.

Vacation has currency value to many candidates but when compared internationally the
United States bodes poorly in this area. However, candidates employed at government
or regulated industries will often receive large amounts of vacation to add to their overall
compensation package without changing their fixed costs of labor. So this is an area
that should be explored prior to an offer or risk learning later of any surprisingly gener-
ous vacation that may exist.

Negotiating on vacation can be tricky due to internal or existing employee packages that may
not be as favorable. Or due to steadfast company policies. Many mid level executives in
particular, do not want to give up vacation when making a job change.

 Health & Dental Insurance, Disability In-
surance, and Life Insurance are voluntary
benefits and will vary by plans offered
 Social Security Insurance, Unemployment
Insurance and Workmen's Compensation
Insurance – mandatory benefits that can
represent a cost to employers of as much
as 20% of total pay

 Exit or Severance Language – an optional
situation typically for senior level execu-
tives. Many Wisconsin clients do not subscribe to this practice unless it is
a C suite position. They view it as a prenuptial and negative approach. How-
ever, many executive candidates coming to the market will have an expecta-
tion of a parachute clause. An agreement for severance may include a six
month up to a one year severance which is triggered upon a variety of factors
including the sale or reorganization of the company. Summarize the special
features and advantages of the product being introduced

Next Steps of Action
 Understanding total rewards is important in
approaching and negotiating changes in
employment

Good luck

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Total Rewards

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