With ongoing change in organization culture, workforce, and a competitive talent market, organizations are evaluating new strategies to attract, engage, and retain a quality workforce.
Total rewards is an emerging human capital management system for HR and business executives. Unlike traditional compensation approaches, a total rewards strategy can help organizations develop a comprehensive package of monetary and nonmonetary rewards that align with the company's goals, culture, and values.
Learn how a total rewards strategy works and how it can help your organization attract and retain talent.
What Is a Total Rewards Strategy?
A total rewards strategy delivers value and experience to the entire workforce, regardless of age, seniority, or position. For most organizations, a total rewards strategy consists of various combinations of compensation, benefits and perks, and rewards and recognitions.
A well-designed total rewards strategy can result in:
- Increased employee engagement, retention, and performance
- Increased organization revenue, customer satisfaction, and quality
There are three core elements to a strong total rewards strategy:
Compensation
How an employee is paid can include hourly rate, salary, commission, bonus, equity, stipends, and monetary awards, like gift cards. As more states adopt the Pay Transparency Act, it’s imperative that organizations evaluate their compensation structures to facilitate market alignment.
Organizations that don’t offer competitive compensation will struggle to attract qualified applicants and may experience internal pay equity issues that can be detrimental to employee retention.
Benefits and Perks
These programs traditionally include health insurance medical, dental, and vision, wellbeing programs, 401K matching, employee assistance programs, meal discounts, vendor discounts, parking, onsite gyms, childcare, laundromats, and more.
In response to workforce expectations and needs, organizations are expanding benefits and perks offerings to include remote work, workplace flexibility, wellness, parking, childcare, transit, etc.
Rewards and Recognition
Designed to promote and provide visibility into the performance or achievement of an employee or group of employees, rewards and recognition can be monetary in the form of compensation or nonmonetary. They can be given top-down or peer to peer.
As workforces become more geographically diverse, rewards and recognition programs are becoming a popular way to increase collaboration and recognition across teams.
How Can You Develop and Implement an Effective Total Rewards Strategy?
Each total rewards strategy is unique. Creating an effective strategy that aligns with your company’s needs and goals begins with identifying your target outcome. Are you simply paying your employees for the work performed? Or do you want to incentivize performance, retain key employees, and boost productivity?
Building an effective total rewards strategy requires creative, innovative thinking to establish a clear direction as well as goals and key performance indicators that track and measure the strategy’s success. Use internal and external research and data to identify workforce needs and trends to bring your strategy in line with the market and offer distinctive differentiators.
Here are key components to keep in mind while you build your total rewards strategy:
Philosophy
A total rewards philosophy is foundational to your total rewards strategy. This philosophy aligns to the culture and values of the organization and sets the expectations and guidelines for how it will compensate, reward, and recognize its workforce.
Market and Compensation Analysis
An in-depth market analysis gives insight into leading rewards practices, costs, benefits, and value. A compensation analysis allows you to compare your compensation offerings to market behavior by various factors, like industry, company type, annual revenue, number of employes, job title or description, and geography.
This information can help you create market-driven, equitable compensation plans.
Strategy Design
Beginning your total rewards strategy by defining the program - including compensation, benefits, wellness, recognition, and development - facilitates a more efficient and expedient build process.
For example, you’ll want to establish:
- Program's purpose
- Program definitions
- Goals and key performance indicators (KPI)
- Stakeholder impact
- Eligibility parameters
- Achievement requirements
- Exclusions
Employee Education and Change Management
Implementing changes is a critical task. Employees typically don’t know what’s available or don’t understand the program’s true value.
A strong communication and reinforcement plan promotes transparency and awareness. Helping employees understand the total rewards program and its value contributes to higher employee satisfaction and referral and increases the organization’s position as an employer of choice.
Tracking, Measuring, and Reinforcing
Establish clear goals and KPI’s for each total reward strategy to gauge how well they’re being adopted and used. Your ability to track, measure, and reinforce performance helps inform decision-making and uncover needed changes that keep the strategy effective.
We’re Here to Help
To learn more about total rewards strategies and how they can contribute to your company’s success, contact your Moss Adams professional.
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