How to create a winning total rewards strategy

Total rewards strategy can be a significant change for your organization, promoting employee loyalty, enhancing job satisfaction, and boosting engagement levels. When facing difficulties with recruitment and retention challenges, offering competitive salaries is often the first solution that comes to mind. However, it's crucial to recognize that salary alone isn't always sufficient to attract and retain top talent. Several factors, including total rewards, influence a candidate's decision to join your organization or an employee's choice to remain.

In this article, we'll explain the essence of total rewards, exploring its components, strategies, and the steps to establish one within your organization.

What is a total rewards strategy?

A total rewards program refers to a method used by organizations for recruiting and retaining employees. It involves enhancing both monetary and non-monetary compensation, including direct, indirect, and non-financial benefits.

Traditional employee benefits packages typically focus on financial compensation, such as salaries, bonuses, and commissions. However, a total rewards strategy includes a broader range of benefits and perks, including indirect compensation like health insurance and wellness benefits. While indirect compensation methods align more closely with a total rewards strategy, there are still additional elements to consider for a comprehensive approach.

Importance of total rewards strategy

A well-designed total reward program not only helps in attracting top talent but also plays a vital role in retaining employees and driving organizational performance. It serves as a potent instrument for aligning employee interests with organizational goals and cultivating a culture of engagement and loyalty.

Understanding the components of total rewards

Total rewards program comprises monetary and non-monetary incentives, aimed at improving productivity, loyalty, and hiring benefits. It should make your organization stand out by focusing on five components: compensation, benefits, flexibility, performance recognition, and career growth.

• Compensation: Base salary and variable pay based on performance.

• Professional development and recognition: Opportunities for growth and recognition of achievements.

• Work-life balance: Initiatives such as flexible schedules and childcare support.

• Benefits: Beyond legal mandates, including retirement options and flexible benefits programs.

• Salaries and wages: Short-term incentives for immediate performance boosts, and long-term incentives like stock options.

Salary.com’s Rewards feature can help provide tracking and visualization for compensation engagement analysis, offering insights into employee interactions with their compensation packages.

Uses of total rewards strategies

Total rewards offer numerous advantages, prompting organizations to adopt them for several reasons. Here's a breakdown of the benefits and applications:

Outperforming competitors

Companies often embrace comprehensive rewards methods to offer employees perks that set them apart from competitors. By providing highly qualified professionals with competitive remuneration, benefits, and growth opportunities, organizations gain a competitive edge.

Recruiting and retaining top talent

A good incentives package attracts top talent individuals, enhancing the organization's performance compared to its counterparts. Moreover, such strategies bolster employee retention, crucial for sustained growth and goal attainment.

Boosting staff productivity

Comprehensive rewards systems serve as effective motivators, keeping employees aligned with organizational objectives. For instance, a well-rounded incentives approach comprising monetary rewards, wellness programs, premium pay or flexible work arrangements can significantly boost employee engagement and goal achievement.

Facilitating career advancement

Good rewards packages usually offer chances for professional growth. Company-sponsored training initiatives, for instance, not only motivate staff but also contribute to their skill development and job performance.

Acknowledging and rewarding success

Total rewards strategies are instrumental in recognizing and incentivizing both individual and team achievements. By acknowledging employees who exceed expectations or demonstrate exceptional teamwork, organizations foster a positive work culture conducive to continued growth and success.

4 Pillars of a total rewards strategy

The concept of total rewards HR revolves around four main pillars: compensation, benefits, development, and well-being. Let's delve deeper into each pillar to understand its significance within the broader total rewards strategy:

Compensation pillar

Under this pillar, various components contribute to recognizing and rewarding employee efforts. For instance, organizations with robust sales teams may opt for commission-based structures to acknowledge their achievements effectively. Such approaches not only motivate employees but also align individual successes with overall organizational goals.

Benefits pillar

Generous benefits, such as uncategorized paid time off (PTO) and unlimited PTO for exempt employees, can be instrumental in promoting employee well-being and satisfaction. These benefits not only alleviate concerns regarding sick days and vacation time but also serve as a competitive advantage in attracting and retaining talent in a competitive job market.

Development pillar

Promoting a culture of internal promotion underscores the importance of career advancement within the organization. While external hiring may be necessary for specialized or leadership roles, internal promotion fosters employee upskilling and strengthens their engagement with the organization.

Well-being pillar

Supporting employee well-being extends beyond traditional benefits to include community engagement initiatives. Partnerships with organizations like Big Brothers Big Sisters and the Best Buddies program not only demonstrate corporate values but also provide employees with opportunities to give back to the community. Offering stipends for involvement further reinforces the organization's commitment to employee well-being and community impact.

How to create a winning total rewards strategy

Here are five important steps to create a winning total rewards strategy:

1. Step 1: Define organizational objectives

   Align the total rewards with the organization's overarching goals and values. Understand the company's mission, vision, and strategic priorities to ensure that the rewards strategy contributes to the overall success of the business.

2. Step 2: Conduct a comprehensive needs assessment

   Engage with employees at all levels to understand their preferences, motivations, and expectations regarding rewards and recognition. Conduct surveys, focus groups, and interviews to gather valuable insights into what matters most to the workforce.

3. Step 3: Design tailored rewards programs

   Based on the needs assessment findings, develop a total rewards framework that offers a mix of monetary and non-monetary incentives. Create competitive compensation packages, robust benefits programs, and meaningful recognition systems that cater to the diverse needs of employees.

4. Step 4: Communicate effectively

   Transparent communication is key to the success of any total rewards program. Clearly communicate the value of the rewards package to employees, highlighting how it aligns with their individual goals and contributes to their overall well-being.

5. Step 5: Evaluate and iterate

   Continuously monitor the total rewards program effectiveness through key performance indicators (KPIs) like employee engagement, retention rates, and productivity levels. Gather feedback from employees regularly and use data-driven insights to make necessary adjustments and improvements to the rewards programs.

Creating a winning total rewards strategy requires a thoughtful and strategic approach that considers the unique needs and preferences of employees. By understanding the components of total rewards, aligning with organizational goals, and effectively communicating with employees, organizations can create a competitive advantage in attracting, retaining, and motivating top talent. Fortunately, Salary.com, which specializes in total rewards consulting and implementation, can provide valuable insights and support in designing and executing an effective strategy tailored to your organization's needs and goals.