The goal of this article is to help business leaders and HR professionals see the wide range of Total Rewards programs at their disposal, why these programs are so important to the success of any organization and what to consider when designing a Total Rewards offering.
Your employees have a significant impact on the short-term results and long-term success of your company, so finding and developing the right employees is a critical business activity for any organization. Your Total Rewards programs, when designed properly and aligned with business objectives, can help you attract key talent in the marketplace, engage and develop employees once hired, and retain talented personnel to support your long-term growth.
This article also covers important tips on how to get the most out of your Total Rewards programs.
What are Total Rewards Programs?
Total Rewards Programs include all employee-facing programs designed to attract, retain and engage employees. These programs can range from base salary and vacation to health benefits and career development, and they’re generally grouped into broad areas based on design, purpose and other similarities. While there is no standard naming convention for the areas of Total Rewards, we typically see programs grouped as follows:
Compensation
Benefits
Work-Life Balance
Performance Recognition
Career Development
Compensation Programs
Compensation programs encompass all cash and stock-based pay provided to employees, such as base wages, performance bonuses and incentive programs. They are generally the most visible programs in the Total Rewards offering and are usually well understood by employees, so they tend to get a lot of attention from HR teams and across the organization.
Well-designed compensation programs can help you attract top talent and motivate your employees. However, studies have shown that direct pay alone is not enough to keep employees engaged. For that, you need a more holistic Total Rewards offering.
Typical compensation programs include the following:
Base Wages, including salaried and hourly pay
Premium Pay, such as overtime, weekend and shift-differential pay
Variable Pay, including commissions and performance bonuses
Short- and Long-term Incentive Programs
Benefits
Benefits programs, such as health, retirement and disability programs, are designed to supplement employee cash compensation and provide security and income protection for employees and their families. These programs can be very helpful and valuable to employees when used properly, but at times they are quite complex, so it’s important to clearly communicate how the programs work.
While some benefits programs may be required by law, organizations that provide programs beyond the legal minimums can differentiate themselves from the competition, improving their attraction and retention of key talent. In addition, strong benefits programs can help improve employee health and decrease the distractions related to health and financial issues, leading to better overall job performance.
Typical benefits programs include the following:
Health Benefits, such as medical, dental, vision and prescription drug plans
Retirement and Savings programs
Disability and Life Insurance
Vacation, Statutory Holiday and Sick Leave programs
Work-Life Balance
Work-life balance programs, as the name suggests, are those programs that encourage a healthy balance between work and everything else in life. Some of the most effective programs provide flexible work hours and locations, support the care of dependents and encourage healthy activities that reduce stress inside and outside the workplace.
When employees feel supported and encouraged to meet both their personal and professional commitments, the results are powerful. Well-designed work-life balance programs can help create an engaging work environment, improve the overall health and productivity of your organization, and increase the attraction and retention of talented employees.
Typical Work-Life Balance programs include the following:
Workplace Flexibility, such as teleworking, flex time and job sharing
Wellness (or Well-being) programs, promoting physical, mental and emotional health
Paid/Unpaid Time Off for parental, adoption and personal leaves
Dependent Care resources for children and elderly parents
Financial Wellness programs, including financial planning, education and coaching support
Performance Recognition
Performance recognition programs provide structure for planning and goal setting, as well as timely acknowledgement of a person’s (or team’s) efforts and behaviours that are beyond normal expectations.
While many organizations rely primarily on annual performance reviews and bonuses to show employees that their hard work is appreciated, the annual frequency misses out on an opportunity for more timely performance management and appreciation. Strong performance recognition programs that are aligned with your organization’s values and goals can drastically improve engagement and productivity without the need for monetary rewards.
Typical Performance Recognition programs include the following:
Performance Planning, Goal Setting and Coaching
Spot Awards, providing timely recognition
Peer-to-Peer Recognition Awards
Appreciation Events
Career Development
Career development programs provide training, coaching and learning opportunities to support employees with their career goals. These programs, when delivered consistently across the organization, can improve engagement, strengthen your company’s succession pipeline, create a positive corporate brand and help you retain top talent.
More and more studies are showing that employees leave jobs, even high paying jobs, because of poor immediate leadership and a lack of opportunities for career advancement. Well-designed career development programs offer employees many possibilities to learn and grow while also providing support to leaders as they help guide and develop their team members.
Typical Career Development programs include the following:
Learning Opportunities, such as seminars, on-the-job training, and tuition reimbursements
Coaching & Mentoring programs, including leadership training
Career Ladders and Succession Planning
Internships, Job Rotations and International Assignments
Why are Total Rewards Programs important?
Your employees will ultimately determine the success of your company, which is why it is so important for business owners and HR teams to be very intentional with the design of their Total Rewards offering. Total Rewards programs help attract key talent in the marketplace, engage and develop employees once hired, and retain talented personnel to support the long-term success of the company.
Check out this video about a company that made a conscious choice to create workplace flexibility by establishing a distributed workforce program and why this approach is so important to their success:
As an organization grows, finding the right candidates at the right time becomes critically important. A well-designed Total Rewards program creates a strong, positive brand in the marketplace and allows you to have your pick of top candidates, even those not currently looking for a new job. This means key positions are filled in a timely manner, projects are fully staffed, and your recruitment teams can focus on finding the best match to the role and your corporate culture.
Once an employee joins the company, the focus of the Total Rewards offering shifts from candidate attraction to engagement and retention. As mentioned in the above descriptions of Total Rewards programs, the right offering can help your company develop strong employees and leaders, provide timely recognition of success and support the health and well-being of your workforce. These activities, as well as many others supported by a strong Total Rewards offering, can positively impact your key talent retention and how you engage your entire organization.
The topic of employee engagement has continued to be front and centre in the world of HR, and for good reason. The benefits of an engaged organization are seemingly endless - from lower absenteeism and employee turnover, to greater productivity and increased profitability. And the key to sustained employee engagement is a well-designed, holistic Total Rewards program.
How to design a strong Total Rewards offering
There are hundreds of Total Rewards programs to choose from, each with benefits and limitations, so how do you decide which programs are right for your organization?
When designing a Total Rewards offering, there are four important questions to consider:
What is your company’s Total Rewards strategy?
What are the industry and geographic norms?
What are the legal requirements and limitations in the country (or countries) of operation?
What are the internal limitations of your organization (such as HR budget or technology)?
Total Rewards strategy
The key to a successful Total Rewards offering starts with the strategy. By first defining your Total Rewards strategy, your organization can avoid adding costly and complex employee programs that don’t align with your overall HR and business objectives.
Your Total Rewards strategy maps out what employee programs your company will offer, the purpose of those programs and how the programs will be governed and administered over time. It also defines what successful Total Rewards programs will look like and how these programs will be measured (i.e., improved engagement or reduced turnover). Some strategies will even define market benchmarks for the Total Rewards offering and spending targets for each program (usually as a percentage of total pay in the company).
While there are various ways to create a Total Rewards strategy, the most important element is that the strategy is tied directly to your overall HR and business strategies. This way, your company can ensure that every Total Rewards program is aligned with your organization’s culture, values and business objectives.
Industry and Geographic Norms
When determining the right Total Rewards programs for your organization, it is important to understand what is being offered by other companies in your industry and location of business. Both industry and location are important to consider, especially if the skills of top talent are easily transferrable across industries.
This information may be available from industry or market publications, chambers of commerce or economic data from governments, although the information is usually at a very high level. For a more customized approach, organizations can take part in a survey or benchmarking study. The most common type is a ‘salary survey’, where companies submit compensation data for various internal roles to a third-party consultant who will aggregate the information from all participants and provide details on pay ranges for all jobs/roles in the survey.
Annual HR trend reports are another good source of information around current practices and future priorities in HR. International and national reports can usually be downloaded in exchange for your organization’s contact information.
Here’s a highlight of some of the findings from Mercer’s Global Talent Trends 2019 Study:
A word of caution when it comes to benchmarking. While it is very important to understand what’s out there, it doesn’t mean you have to match or exceed the Total Rewards programs offered by your competitors. If your organization is losing talented employees because your programs don’t hold up to the competition, then definitely consider targeted changes. But be careful to remain true to your Total Rewards strategy, as this will ultimately determine the long-term success of your organization.
Legal Requirements and Limitations
If your organization offers Total Rewards programs that are in line with your strategy and competitive within your industry and location of business, then it’s likely you’ve met the minimum legal requirements in your country (or countries) of operation. However, it’s still important to engage legal expertise (either internal or external) to ensure your programs meet the minimum standards and to identify any other mandatory benefits.
Legal reviews are also important to identify Total Rewards programs that may be subject to limitations or maximums, especially those programs that provide tax deductions for the company.
Internal Limitations
While your Total Rewards programs must, at a minimum, meet all legal requirements, your organization may not be able to provide all the desired programs identified in your benchmarking and strategy activities due to internal limitations.
The most common internal limitation is your corporate HR budget. If your current budget does not support your desired Total Rewards offering, your HR and Total Rewards strategy can help you determine which programs are the highest priority based on business need and alignment with the corporate strategy. And in some cases, you may be able to get an increase in your HR budget if your company has identified attraction, retention or engagement of key talent as top, company-wide priorities.
It is also important to review the current capabilities of your organization to determine if the delivery of some Total Rewards programs may be limited by corporate systems, technology or employee expertise. By identifying limitations early in the design process, your company can take the necessary steps to ensure your Total Rewards programs are delivered efficiently and effectively.
How to get the most out of your Total Rewards programs
Whether you’re a small company with just a few employee programs or a large, international organization with a robust Total Rewards offering, it’s important to get the most out of the programs you’ve chosen to deliver to your employees. Key areas of focus that will positively impact the success of your Total Rewards offerings include the following:
Employee Communication and Education
Measurement and Employee Exit Interviews
HR Teams, Systems and Processes
Leadership Development
Employee Communication and Education
Total Rewards programs are more effective and provide more value when they are understood by employees. Some programs, such as compensation or vacation, are easy to understand because they provide something very tangible. Other programs, such as flexible benefit plans or retirement programs, can be more complicated to explain. And in more extreme cases, employees may not be aware that certain Total Rewards programs exist.
For these reasons, it is very important to effectively communicate your Total Rewards programs to your employees and provide education for programs that may be more complex. Employee communications can include employee handbooks, information on your corporate intranet or program descriptions during new hire orientation/onboarding. More direct educational sessions on specific Total Rewards topics can also increase the understanding and perceived value of your Total Rewards offering.
For companies with a wide range of Total Rewards programs, Total Rewards Statements are an excellent form of communication. Total Rewards Statements (also known as Total Compensation Statements or Employee Benefit Statements) provide employees with a personalized overview of the programs their company provides, including monetary values where appropriate and applicable. While employees see statements for their pay or retirement savings on a regular basis, Total Rewards Statements allow your organization to present employees with a holistic and personalized picture of every program offered.
Measurement and Employee Exit Interviews
As part of their Total Rewards strategy, organizations will identify how the success of their Total Rewards offering will be defined and measured. The measurement process is a critical component in Total Rewards design and delivery as it provides the organization with information on what’s working and what’s not.
In order to measure success, companies will need to ensure they have the systems in place to properly track specific metrics (commonly referred to as key performance indicators or KPIs). These tracking systems can include those managed by HR (such as HR info and payroll systems) as well as those managed by other parts of the organization (such as accounting systems for tracking program costs).
Some larger organizations will measure their Total Rewards programs as part of an HR or Corporate Scorecard. These scorecards may be used as a form of internal tracking only, or they may form part of the compensation review process for bonus pools or executive pay (as is normally the case for Corporate Scorecards).
Another excellent source of measurement information is the employee exit interview, when designed to include questions about Total Rewards programs. One of the key purposes of a Total Rewards offering is to retain talent, so employee turnover tends to be perceived as a failure of some part of the offering (such as lack of career advancement or not enough pay). Exit interviews can shed some much-needed light on the true reasons for employee departures and whether these factors are within your company’s control.
HR Teams, Systems and Processes
In many organizations, the responsibility for the success of the Total Rewards offering sits with one or two teams within HR. While it is important to identify the teams responsible for making program design decisions, the successful delivery of your Total Rewards programs depends on the entire HR team as well as the leaders in your organization (more on leaders below).
Even before joining your company, potential candidates will assess your Total Rewards offering through the interaction with your recruitment team. Recruitment team members should be equipped with the necessary understanding and resources to be able to describe and promote the entire Total Rewards offering. Candidates may also reach out to current or former employees of your organization, which is yet another reason why it’s important for your employees to understand the value of your Total Rewards programs (see Employee Communication and Education above).
Once an employee is hired, they will immediately interact with a number of HR professionals, systems and processes. Even though there may be many different teams involved, most employees will not see a distinction. This means that all interactions with HR, from recruitment to payroll to HR info systems, will impact an employee’s perception and trust of HR, including all your Total Rewards programs. Positive employee experiences, streamlined HR processes and simple HR systems will help your organization get the most out of your Total Rewards offering.
Leadership Development
Looking beyond the HR team and into the entire organization, there is another key group who will have an immediate and sustained impact on the successful delivery of your Total Rewards programs. Leaders are not only critical to the success of performance recognition and career development programs; they are also your organization’s first line of in-person communication with employees.
When leaders understand the Total Rewards programs offered and why those specific programs were chosen, they can positively influence employee perception and program utilization. And as they learn how to use these programs to positively engage their teams, leaders will become some of your strongest supporters of the entire Total Rewards offering.
We can help you with your Total Rewards needs
We hope this article has helped increase your understanding of Total Rewards programs, including why they’re are so important, what to consider when designing your Total Rewards offering and how to get out the most of your programs.
At RS Consulting & Coaching, our goal is to help companies design and deliver Total Rewards programs that support their unique culture, brand and business objectives while empowering employees to achieve their own personal and professional aspirations. We believe that all parts of the Total Rewards offering can have a positive impact on an organization’s workforce and bottom line:
Compensation programs that go beyond the traditional financial metrics and align with business objectives.
Benefit programs that provide meaningful support in all stages of an employee’s life and help attract and retain top talent.
Organizational structures and work arrangements that enhance daily productivity while promoting flexibility, engagement and employee well-being.
Recognition programs that acknowledge the unique contributions of employees and promote activities that strengthen the company’s brand and culture.
Career development programs that encourage the unique skills and motivations of each employee and empower employees to find alignment with the goals and aspirations of the company.
Leader development programs that go beyond performance reviews and bonus decisions and equip leaders at all levels with the tools necessary to engage and empower their teams and colleagues.
Learn more about our consulting, coaching and interim management services here.
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About the Author
Jason Rempel is an accomplished business leader, consultant and coach and a specialist in the areas of HR and Total Rewards. He has extensive experience designing and managing international employee programs, providing strategic direction on operational, pricing and compliance matters and leading large teams of skilled professionals.
Over the course of his career, Jason has served as a member of pension and benefits governance committees, provided HR program evaluation for acquisitions and divestitures and presented at a variety of employee forums and industry member events. He has a passion for helping businesses and individuals find success and has spent many years coaching and developing high performing individuals and teams.
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