Category All, Best Practices The Role of Total Rewards in the Company A company’s attitude towards compensation, benefits, and rewards that all employees receive speaks volumes about its appreciation towards its workforce. However, designing a balanced total rewards compensation package for a large workforce is not a walk in the park. September 7, 2022 By Ivo Jurcic Sure, offering a competitive salary is great, but in today’s all-out-war for skilled labor, enterprises have to give more than money to keep their top talent. This is explained by the fact that the amount of money an employee receives does not fundamentally change an employee’s feelings and attitudes towards their daily work, nor does it guarantee their long-term stay at the company. In fact, the way organizations view employee compensation has matured over time. It takes more than a salary with a few benefits to keep your employees. A well-rounded compensation package will address all the employees’ needs, keep them satisfied and make them feel appreciated for their hard work. With that in mind, let’s talk about the role of Total Rewards in a company. Designing a Total Rewards Compensation Package Broadly speaking, a total rewards compensation package is a combination of benefits, wages, and rewards that, ideally, address all (or most) employee needs. Naturally, the 3 items we mentioned vary to a tremendous extent. There are dozens of types of employee benefits, different compensation methods besides the salary, and various monetary and non-monetary employee rewards. It takes genuine skill and insight to understand how these overlap, and design a compensation package that will be a magnet for employees. Of course, the resources for employee rewards can be limited, but that shouldn’t stop organizations from designing total rewards packages for their employees. Thankfully, total rewards experts are here to save the day. Total rewards experts rely on an abundance of employee data to understand the needs of their workforce and to figure out a feasible way to introduce as many rewards as possible to cater to those needs. Here are the contents of a total rewards package: A total rewards professional will analyze how much value these rewards and benefits bring to the organization’s workforce and design a delivery plan for including them in the total rewards program. Compensation Compensation refers to the combination of all direct ways an employee can earn money at their position. When you say compensation, most people think about the salary and bonuses. However, stock options are some of the most prevailing compensation methods in growing tech organizations. Other popular compensation options are seasonal bonuses, such as the end-of-the-year bonus. Benefits Employment benefits are the sum total of non-wage ways of compensation that an employee receives. Alongside the salary, benefits provide a foundation for employees’ social security and are often the deciding factor when applying for a job. According to a Clutch survey, the most commonly offered benefit is paid vacation time (65%) and health insurance (62%). Other examples of employment benefits are dental insurance, retirement planning, and parental leave. Learning and Development Younger generations of workers perceive learning and development opportunities as a critical part of their employee experience. Research by Gallup has found that Millennial workers are much more likely to accept a position that accelerates their professional growth than gen X workers or boomer-generation workers. To be specific, 45% of millennials rate professional growth as “very important” versus 31% of gen X workers and 18% of workers from the baby boomer generation. Today, competitive organizations have to provide development opportunities for workers to develop technological, teamwork, or social skills. Recognition programs Companies with a mature understanding of employee experience recognize that employee recognition programs are a key part of a total rewards package. Recognition programs highlight individual employees’ contributions, reward their efforts publicly, and create a sense of value that affects their total reward experience. Recognition programs are outstanding for satisfying employees’ emotional need for recognition and gratitude they expect from their employer. Popular examples of employee recognition programs are: Company thank you awards Lunch with the CEO The employee of the month program A company-wide email recognition from a top-ranked executive Wellbeing programs The importance of wellbeing programs as an integral part of the total rewards package has skyrocketed since the 2020 global pandemic. In the pandemic’s wake, employees reported record-breaking stress levels and voluntary resignations. Today, more companies understand that employee wellbeing is necessary in order for employees to be satisfied in the company. By the same token, wellbeing programs are company-wide initiatives used to support employees’ wellbeing outside of the organization, especially their physical and mental health. Here are some examples of wellbeing programs in total rewards packages: Gym memberships Mental health counseling Meditation/mental health app subscriptions Employer incentives to quit smoking Work-life balance incentives Providing personalized benefits Every employee has individual needs that a comprehensive total rewards package has to address. Instead of treating employee benefits as something to be covered with a one-size-fits-all benefits plan, people-centered enterprises offer their employees personalized benefits on top of their total rewards package. In the wake of the Covid pandemic, employees have stressed how much they value flexibility and individual treatment for their benefits. Willis Towers Watson released a survey with over 40 000 workers at medium and large organizations across 27 countries and 8000 US employers. The survey revealed that 42% of employees would give up additional pay for larger health benefits. Additionally, as much as 67% of employees would accept a lesser salary for richer retirement benefits. It’s important to note that what older workers and Millennials or gen Z identify as key needs can be vastly different. Established employees value retirement plans and health care benefits, while younger workers want programs that will support their career advancement and gaining financial wellbeing. Personalization makes benefits more meaningful because it helps address specific needs that are particular to one segment of the workforce. For instance, MBP, a construction management consulting company with around 300 employees, added employer-sponsored pet insurance for younger workers that claimed the security of their pets is a key emotional need. Initially, we laughed about the idea of adding pet insurance to our benefits. However, it turned out that younger employees really want it and it has real meaning for them. Many of these younger employees view their pets as their children and want to have the means to take care of them. It’s another way to increase security in their lives. Julie Coolbaugh, Senior Vice President at MBP Skilled total rewards experts strive to provide personalized benefits to their employees to address their individual needs. The most common method of providing a large scope of benefits is to create monthly or annual expense allowances for individual employees. With the allowance, companies can provide multiple personalized benefits outside of their general benefits assortment. Employees can simply choose which personalized benefits they would like subsidized by the allowance, and have benefits that match their individual needs. Today, it’s not uncommon for organizations to have reimbursement plans as part of their personalized benefits programs. Interestingly, a 2021 study from Mercer revealed that employees with the most varied health and wellbeing benefits had the most positive attitude towards their employers. The study reports these findings for employees with 10 benefits or more: 59% said they are less likely to look for work at another company because of the wellbeing and health benefits they receive 60% reported feelings of being cared for by their employers 75% reported feeling energized at work because of the benefits’ impact 92% say they are more confident they take care of their family’s healthcare needs Assessment of the Total Rewards Program Total rewards managers understand total rewards programs should be continuously assessed and improved since employee needs are subject to constant change. For instance, employee needs have changed practically overnight during the global outbreak. HR professionals and total rewards managers had to re-evaluate and adapt their total rewards packages or risk losing their employees during the Great Resignation. A great example of an organization adapting its total rewards package to address the 2020 challenges comes from Starbucks, which provided all its US employees and eligible family members access to 20 sessions a year with a mental health professional via an app, at no cost to the user. However, an organization with a mature grasp of total rewards will assess its total rewards program diligently and respond as fast as possible. This role is carried out in multiple phases. First, total rewards professionals conduct focus groups of employees to gather as much employee data as possible and understand the pressing needs of their employees. Professionals use multiple methods to collect data: Industry benchmark surveys Feedback sessions Opinion encouragement Employee interviews The goal is to ensure that focus groups accurately represent the employees that will be affected by the changes in the total rewards strategy. Once the organization has a clear understanding of its employee needs, it can examine its current total rewards offerings and its employees’ attitudes towards their rewards. One of the most important assessment tools is the Pay Satisfaction Questionnaire, used to determine employee attitude toward their base pay, salary raises, and other monetary rewards. Besides the salary, total rewards experts must determine employee satisfaction with the benefits package, development opportunities, recognition programs, and wellness initiatives. This is also an opportunity to identify which benefits are costly and yield poor results. In the last phase, total rewards handlers create a report that documents the assessment and recommends improvements. The recommendations have to be supported by accurate and reliable data and reviewed alongside the industry literature, such as human resource publications, technical books, and research journals. The report has to reveal the results of the current total rewards strategy versus the proposed and improved total rewards solution. Management of total rewards programs By now, we can agree that the ecosystem of total rewards is fairly complex and requires delicate management in order to be successful. Management of total rewards programs consists of implementing changes in the current TR strategy and providing administrative support for all the rewards, benefits, learning processes, recognition programs, and wellbeing initiatives. A long sentence, isn’t it? Let’s unpack it together, starting with change implementation. As discussed, total rewards programs have to be consistently evaluated and improved. Doing so would be impossible without HR technology that empowers HR departments to update the contents of the total rewards package. SHRM cited a case of Labcorp updating its employee wellness program in total rewards during the pandemic, by offering its employees reimbursement for health and fitness items instead of the free gym membership benefit. We reimburse our employees up to $300 annually for a variety of health- and fitness-enhancing items, including home exercise equipment. This program has become increasingly important during the pandemic, with gyms closed at various stages. It was important to Labcorp that employees felt supported and encouraged to continue putting their health first. Kim Beck, Health and Wellness manager at Labcorp This example personifies agile management of total rewards programs; identifying wellness as a key employee need, implementing change appropriate to new circumstances, and providing the important benefit. When you have a global workforce, changing a company’s total rewards offering requires large-scale implementation. This is made possible by using a string of HR technologies that empower HR and total rewards professionals to manage the total rewards programs, introduce new offerings to the current TR strategy, and update their benefits. Imagine a company with thousands of employees in a similar situation as Labcorp. An HR professional or total rewards manager would use an employee wellbeing solution to access employee benefits of the entire workforce and administrate change to the current wellness offerings. Note that total rewards programs comprise 4 more categories besides employee wellbeing. All of them, including monetary and non-monetary recognition, have to be managed and administered accordingly by total rewards professionals or a skilled HR department. Total Rewards are Here to Stay With the global shortage of skilled workers, leading companies are turning to total rewards to become magnets for employees. The role of total rewards experts is to help companies deliver an exceptional reward experience that creates a sense of stability and develops a genuine long-term relationship with employees. A total rewards expert will: design a total rewards program assess the current reward and recognition culture manage total rewards devise personalized benefits to meet specific employee needs Reflect on what you’ve read today and think about your company’s attitude towards total rewards.