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The HR world is full of buzzwords and jargon terms that sometimes don’t mean much. But when it comes to Total Rewards, it’s essential that HR professionals know what it is, why it’s important, and how to create/implement a customized Total Rewards strategy for their organization.
In this article, we’ll go over what Total Rewards are, why every company needs a strategy, how to create a fitting strategy for yourself, and then some examples. By the end, you’ll have the confidence to either implement or improve your Total Rewards strategy to set your organization apart.
- Total Rewards encompass compensation, benefits, professional development, recognition, and well-being.
- A good Total Rewards strategy can improve productivity, recruitment, retention, and satisfaction.
- To create your own strategy, you must assess your needs, talk to employees, set value-based goals, emphasize flexibility, and track impact.
What Are Total Rewards?
Total Rewards, in a nutshell, include everything that an employer uses to reward its employees. Typically, you can break Total Rewards down into five parts:
- Compensation. How much an employee is paid is a huge part of Total Rewards. Compensation needs to be competitive and sufficient for an employee’s needs.
- Benefits. Benefits show how much an employer cares about their employees. From healthcare to free lunches, benefits can vary widely.
- Recognition. Employee recognition includes incentivizing behavior, rewarding those who excel, and recognizing people for the value they bring. It’s under-valued by many organizations—however, employees are more motivated and engaged when they feel valued.
- Professional development. Training and development include continuous learning, skill development, and promotion opportunities. Employees need to feel like they can improve, hone their abilities, and earn more money.
- Well-being. Well-being encompasses everything from wellness and DEIB to flexibility and work culture. Employers need to show that they care about all facets of an employee’s life, not just their work.
Total Rewards include every single thing an employer does to make work and life better for employees.
Why Are Total Rewards Important?
Why do you need to worry about Total Rewards? And why should you create a full Total Rewards strategy? Well, a comprehensive Total Rewards strategy, when planned and executed correctly, can bring in a metric ton of benefits. Take a look at some of them below.
1. Recruit and Retain the Best Talent
With the Great Resignation still hanging around like the extended family member at a party who can’t take a hint, recruiting and retaining talent needs to be a high priority for all organizations. With Total Rewards that are truly rewarding for employees, people are going to want to work for you. They’re also going to want to stay through hard times because they know you care.
Think about this hypothetical situation: you’re looking for a job, and you find two options:
- Option one offers good pay, traditional benefits, inflexible policies, holiday parties, and not much room for growth.
- Option two offers slightly lower pay, extensive benefits, total flexibility, robust recognition, and a transparent path for upward mobility.
For many, especially those who value feeling valued, option two is the better of the two—and that’s because they have a more robust, strategic Total Rewards plan.
2. Increase Motivation, Productivity, and Engagement
When employees feel like they’re rewarded and compensated fairly, they’re more likely to stay engaged with their work. When they feel like their employer cares about them as people, they’re more likely to be loyal. And when they’re rewarded for their efforts, they’re more motivated to work hard.
Traditional benefits, including compensation, aren’t enough anymore. For employees, the way they feel at work is far more important than traditional benefits. According to HBR, things like autonomy, flexibility, personal growth, and a sense of purpose are better ways to keep employees engaged and motivated today—and those are all aspects of a Total Rewards strategy.
3. Make Administration Easier
HR professionals have a lot on their plates. We get it. The best thing about creating a Total Rewards strategy is that all of your administration work is centralized, organized, and planned.
With the right strategy, compensation, benefits, training, and recognition are all wrapped into one, where companies can monitor employee involvement, manage budgets, and track results easily and efficiently.
4. Outperform the Competition
Effective Total Rewards boosts productivity, helps employees gain new skills and confidence, provides an incentive to exceed expectations, and keeps employees motivated and happy. Compare that to organizations without a Total Rewards strategy: disengaged employees, unhappy employees, unmotivated employees, and burned out employees.
Which organization is going to perform better?
How to Create a Total Rewards Strategy for Your Business?
Every business is different, and every employee is different, so how do you create a strategy that rewards, motivates, and satisfies everyone without breaking your budget? There are eight steps you can take to get Total Rewards started on the right foot—these steps take some effort to start, but things will be easy and effective in the long run:
- Assess your needs. What benefits or reward systems do you already have in place? Where are the gaps you need to fill? What’s your budget for compensation, recognition, training, etc.? Evaluate what you have and see where you can improve.
- Talk to employees. Total Rewards strategies are for the employees—so talk to them! What do they wish you did? What are they happy with already? What are they looking for when it comes to benefits and perks? Send out surveys, conduct interviews, and have managers get this information.
- Work with leadership. Include leadership in any discussions and decisions. Show them the results of employee surveys and your Total Rewards audit. Explain which improvements you’d like to make and explain why these improvements are important.
- Align Total Rewards with company values. Employees are much more engaged when their work is tied into values. The same holds true for Total Rewards. For example, one of Awardco’s values is to “Recognize the Good,” so our Total Rewards strategy includes many ways to recognize those around us and be recognized in turn.
- Aim for flexibility and a far reach. Try to be as flexible as possible when creating a Total Rewards strategy. Some people may really want more parental leave, while others don’t care about that. One person may want more flexibility, while another simply wants more pay. Focus on a balanced approach—and offer personalization options where possible.
- Adapt and improve. Once you implement your new strategy, you have to be on the watch for feedback and missed opportunities. Employees’ needs evolve over time, and your Total Rewards have to evolve with them. Keep up with trends, and your employees will love you for it.
- Communicate with employees. The best way to increase participation is to frequently communicate the benefits you’ve included in your Total Reward strategy. Clearly explain how they can take advantage of the myriad perks you offer. Train managers on how to recognize more and how to hold effective performance evaluations. Through this, you can spread the word and get employees excited.
- Track the impact. It’s impossible to execute a perfect Total Rewards strategy right off the bat. Instead, track which aspects of your strategy are getting a lot of engagement and use. This will help you see which aren’t as popular or impactful. Once you know that, you can adjust accordingly to make the best use of your budget.
By following these steps, you’ll create a Total Rewards strategy that reaches most of your employees, makes them feel valued, and provides tangible, exciting results.
What Are Examples of Total Rewards Programs?
Even after all this, you may not be sure where to start…and that’s okay! Total Rewards is a huge, many-headed beast that can be confusing to try to tackle. Here are some ideas to help you get started:
- Mental health resources. 1 in 4 employees are very or extremely stressed. Stress leads to burnout, which leads to low productivity and turnover. However, only 18% of employees feel mentally supported at work. Resources to support mental health are a great way to stand apart from the competition.
- Employee rewards and recognition programs. When companies regularly recognize and reward employees, morale, productivity, performance, customer satisfaction, and retention all improve. With a recognition program, you can make recognizing, rewarding, and celebrating easier than ever.
- Greater flexibility. What are ways to offer flexibility at your company? Remote or hybrid working options? Flexible hours? More PTO for health needs or vacation wants? Whatever you can do, 60% of employees say they want flexibility more than better salary or benefits. Flexibility is here to stay!
Total Rewards: Totally Required
With a good Total Rewards strategy, employees will love working for you. They’ll feel valued, supported, and happy, and they’ll respond with greater productivity, loyalty, and effort. Take the time to build out a strategy for your business and see the benefits roll in.