What is a Total Rewards strategy?
A total rewards strategy connects compensation and benefits and provides a range of rewards to employees who achieve defined business goals. Put simply, the strategy defines salary, benefits, and intangible rewards designed to attract, motivate and retain the best performing employees.
What are the benefits of introducing a Total Rewards strategy?
A well-thought-out strategy to rewards and recognition provides organisations with several benefits:
Recognising and rewarding employees drives morale, maintains employee motivation and increases engagement.
Many benefits and rewards can be provided at little or no cost. Recognising employees by giving them increased responsibility or involving them in more engaging projects, can significantly increase engagement and motivation.
People looking for employment are attracted to organisations that provide a comprehensive and well thought out rewards and recognition package. Employee word of mouth about your organisation also helps attract desired talent and makes your organisation an employer of choice.
An organisation with engaged and motivated employees has been shown to lower turnover, which reduces the cost of hiring and developing new employees.
What elements should be included?
A Total Rewards strategy typically encompass five key elements: Salary/Compensation, Benefits, Professional Development, Reward and Recognition, and Work-life balance.
Compensation refers to the money earned by the employee. It consists of a base salary or hourly wage, any incentive pay for overtime and holidays, bonuses earned and commissions, and sales and service tips. In some companies, it also includes bonuses and some form of profit sharing. An employee’s compensation varies based on job title, required level of education, experience, and responsibility level.
Benefits are those things that fall beyond the standard compensation. They can include a variety of mandatory elements and some that are optional on the part of the employer. Examples of mandatory benefits in the UAE include health insurance, annual flight tickets for expatriates, Emirati pension programme, and end of service benefits. Optional benefits can consist of pension programmes, life insurance plans, education packages for dependent children, reductions in product and service costs via loyalty cards or percentage discounts for selected goods and services, free or subsidised food provision, and gym memberships. Mandatory benefits are based on regulations in the country in which the employee is based. So organisations with an international workforce may have to devise multiple benefits packages and policies.
3. Professional Development
Professional development includes elements such as graduate tuition reimbursement, payment of accredited body memberships, funding for access to developmental courses, or access to international conferences, for example.
Another typical developmental benefit is access to a mentor to guide and advise. If mentoring is managed as a professional model with support across the company, it can provide a valuable development opportunity.
Some organisations provide access to lunchtime development sessions, often known as “brown bag” sessions since employees are encouraged to bring their lunch and treat the opportunity as an informal learning event.
Another common professional development option provided in many organisations is free access to a wide range of online course content for self-development, either via an internal learning management system or via a funded internet subscription to a third-party resource such as LinkedIn Learning or Coursera, for example. In some cases, access is extended to family members also.
4. Reward and Recognition
Usually, recognition within a total rewards strategy is a formal programme or process for identifying and rewarding high performance. These recognition programmes typically provide a tangible reward such as a plaque, gift, or certificate and can come with titles such as “Employee of the Month”.
Some companies provide branded gifts to increase the sense of company loyalty and often supplement; for example, a branded coffee mug may have a gift card included for a coffee chain. There are companies set up to help organisations provide personalised and branded gifts, and they offer additional services such as engraving of items purchased to provide a level of personalisation.
Often recognition includes publicising the achievement in a company newsletter, via a news release or on the company’s website. Publishing achievements not only act as a reward for the individual but as a motivator for colleagues.
Examples of group recognition can include funded team lunches and company or departmental parties around holiday times.
5. Work/Life Balance
Providing employees with options to support their work/life balance varies considerably between companies. Elements may include something as basic as offering flexible working hours or providing in-house yoga sessions. At a more advanced level, this area of reward includes child-care services in the form of a creche or arrangement with a third party, participation in community service initiatives such as “Clean the Beach”, or even overseas volunteer programmes such as building a school in an impoverished country. Increasingly support for work/life balance includes access to mental health support.
What steps can you take to set up a Total Rewards strategy?
Setting up a Total Rewards strategy involves three basic steps:
1. Understand your current benefits and awards environment
It is critical that you know what your organisation currently does and what is affordable and practical given your employee demographics and operating environment.
2. Understand the market
You need to research what competitors in the market are doing in the area of compensation and benefits if you are to stand out from the crowd and position your organisation appropriately. This benchmarking is typically something that is repeated annually to ensure that the organisation’s remuneration and benefits policies remain competitive. You also need to take a global perspective if you have employees based overseas and need to understand what your employees value and appreciate if you are to structure an all-encompassing approach.
3. Create your Total Rewards strategy and market as the employee value proposition (EVP)
The employee value proposition (EVP) is what attracts employees and is often why employees stay engaged with an organisation. The Total Rewards can be incorporated into individual statements that are personalised to define the rewards applicable to each employee. Alongside the private personalised statements, it is critical that organisations make the common Total Rewards strategy transparent and available to all employees.
Creating a Total Rewards strategy allows organisations to have a clear and unambiguous set of policies and processes that connect compensation, benefits and employee performance, and support the organisation in cost management, brand promotion, and engaging and retaining employees.
Contact us at HRBluSky today to explore how we can support your approach to compensation and benefits.