Category All, Best Practices Designing a Successful Total Rewards Strategy for 2021 Find out how to design a successful Total Rewards strategy to take care of your employees’ current and future preferences. October 23, 2020 By Sara Ana Cemazar Total Rewards programs play a crucial role in company’s ability to stay competitive. Not only do carefully designed Total Rewards programs help increase employee retention, they also attract new candidates to the company. As such, Total Rewards are integral to any company’s internal development strategy. Companies see more competition than ever from their peers, and the ever-changing landscape of global workforce poses an additional challenge. This article can serve you as a guide to Total Rewards. You will find out what are the areas Total Rewards should cover and how to develop and implement a Total Rewards Strategy in your company, including the most influential trends in Total Rewards for the next couple of years. 💡 Before we start, get our Employee Recognition Playbook to help you design and implement an employee recognition program in your organization. Definition of Total Rewards In most enterprise companies, Total Rewards are affiliated with HR departments and consist of several team members. The Total Rewards system comprehends all monetary and non-monetary rewards to organization’s employees, including their base pay as well as benefits and employee incentives. The aim of Total Rewards strategy is to optimize employees’ experience and satisfaction with everything employees receive as a remuneration for their work. Main Areas Covered by Total Rewards According to WorldAtWork’s model, Total Rewards comprehend five areas. Influences on Total Rewards strategy are often part of a wider environment, such as culture, social norms and legal regulations. However, company’s leadership also heavily influences Total Rewards strategy. Furthermore, Total Rewards strategy naturally affects employee experience and organizational performance. But first, let’s find out the main pillars of Total Rewards and how they complement each other. Compensation Compensation is naturally the integral part of Total Rewards strategy. The pay that employees receive for their time and effort are at the very foundation upon other aspects of Total Rewards are built up. Many companies structure their compensation according to market trends and their employees’ experience. However, 64% of people that are paid at market level believe they are being paid below market level. This calls for establishment of clear, open door compensation policy that is advocated by many workforce specialists. Employee Wellbeing Employee wellbeing’s importance as one of the pillars of Total Rewards grew over time. This became evident as employers and employees alike realized how significant work-life balance is. According to HR Drive, only 8% of employees think work-life balance is less important than compensation. Furthermore, employee wellbeing programs that include gym memberships, health insurance and healthy meal options have proven to be a good money-saving strategy. Namely, Johnson and Johnson report that their employee wellbeing program has saved the company $250 million over the last decade, most likely in costs of heightened absenteeism and decreased productivity. 💡 Read more: 10 ways to improve your employees’ health. Employee Benefits As well as wellbeing, employee benefits have developed into a versatile area of Total Rewards. As employee benefits area includes additional monetary and non-monetary perks that are not part of the compensation package, they often include employee wellbeing benefits. As a matter of fact, one of the most desirable employee benefits include health insurance, more vacation time and more remote work options. Employee Development 68% of employees believe that development and training are company’s most important policies. Why is it a part of Total Rewards? Well, employers realized that employees do not value only traditional and mostly monetary awards. Knowledge and skills are highly valuable assets nowadays, especially among Millennials and Gen Z. Therefore, candidates are treating employee training and development opportunities as one of standard categories when choosing their next employer. However, employers are yet to realize the power of in-house employee development. Even though it is formally included in Total Rewards strategy, we often see employees leaving their employers because of lack of development opportunities. Therefore, investing in employee development is often cited as one of the best strategies for reducing employee turnover. Employee Recognition Total Rewards also include employee recognition. When best employee recognition practices are utilized, companies see increase in employee motivation, productivity, retention and more. Employee recognition goes way beyond monetary incentives, and it might be the most complex area of Total Rewards. This is because employee recognition often includes deep changes in employees’ behavior and company culture. However, this should not discourage anyone from implementing the best employee appreciation practices – especially considering its benefits. 💡 Find out in what ways is employee recognition crucial for company’s success, and get our employee appreciation letter templates and employee appreciation quotes to recognize your employees’ work. How to Implement Total Rewards Strategy Updating or implementing a new Total Rewards strategy is a comprehensive task that involves research and consultation with multiple internal teams. Considering that Total Rewards include compensation, benefits, wellbeing, development and recognition, it takes a lot of balancing and finding the right formula that will work for your company. Here are 5 simple steps to follow when designing a new Total Rewards strategy. 1. Assess the current state of your Total Rewards What is the current state of your Total Rewards? Get the relevant data – meaning your employees’ salaries, benefits that you offer and your employee recognition program’s results. Compare the data with the relevant market data – for example, use Glassdoor. Moreover, evaluate if your employees’ compensation is fair in regard to their colleagues. Furthermore, are you offering benefits that employees really want? What are the most and least popular benefits, and for which groups of employees? You need to ask yourself these questions and more to correctly identify the gaps in your current Total Rewards strategy. 2. Understand what your employees value Even though it will provide you with valuable insights, comparing your data to other companies’ will not give you the right idea about what your employees actually want. For example, maybe your employees would settle for smaller compensation just so they can work remotely more. However, it would be wrong to make assumptions here as every company’s employees are different. Therefore, you should conduct an employee survey and try to understand what your employees really value. According to Willis Towers Watson research, only 56% of employers understand the current Total Rewards offerings that their employees value. In comparison, 57% of people say that perks and benefits are among their top considerations before accepting a job. 3. Include leadership Do your leaders understand how important it is to implement an effective Total Rewards strategy? Although 46% of senior managers perceive recognition programs as an investment instead of an expense, you still need to illuminate the importance of carefully designed Total Rewards strategy to your senior leadership. As a matter of fact, your leaders should be the advocates of your new strategy. The best way to persuade your leaders to take your side is to show them the link between your new Total Rewards strategy, increased employee satisfaction, company’s attractiveness to prospective employees and business results. 4. Determine your priorities and communicate changes It is most likely that your new Total Rewards program will have to be introduced in several phases. Therefore, you need to determine your priorities and redesign areas with most gaps first. However, it is important to create a plan to unroll new parts of your Total Rewards initiative in the upcoming years. Your employees need to be aware of the changes you are making to your Total Rewards strategy. Not only will they feel heard, but will also be interested to see how these changes will affect them. 💡 Take a look at our internal communications plan for launching an employee recognition program and borrow an idea or two. 5. Measure the cost and impact of your Total Rewards Although the top metrics that assess Total Rewards programs are related to its cost, you should try to evaluate their impact. Here is what you could measure to assess the effectiveness of your Total Rewards programs: Employee engagement Employee retention Employee satisfaction Employee absenteeism Healthcare costs Employer branding. Total Rewards: Future Predictions When it comes to trends in Total Rewards, we see many employers aligning Total Rewards programs with their talent value proposition. This is not unusual, since one of companies’ biggest issues today is the growing skill gap. Moreover, Willis Towers Watson research shows only around a quarter of companies whose Total Rewards’ programs are lagging in quality design their programs to help employees achieve wellbeing, compared to almost 70% of companies whose Total Rewards programs are of high-quality. This research also found that top performing companies’ goals regarding Total Rewards consider providing more flexibility, improving technology for employees and adding even more health and wellbeing benefits to their portfolio. These trends go hand in hand with current world situation. As pandemic progresses, employees will surely look for employers that ensure them the best health and wellbeing benefits. Moreover, companies need to ensure seamless remote work experience, which includes advanced technology for main areas of Total Rewards. 💡 Related to that – check out how our employee recognition and rewards platform JobPts would fit into your Total Rewards Strategy. Besides high user adoption rates, it includes wide variety of reward options and can be highly customized for your company’s needs.