A study revealed 88% of employees agree it is essential for companies to reward employees for good work. A total reward strategy offers monetary compensation along with other benefits and development opportunities to a workforce that meets the required goals, as per SHRM.
The strategy includes monetary and non-monetary benefits, career growth opportunities, incentives, and employee recognition programs. It doesn't just help improve employee retention, but also attracts new talent to the company. Hence, the total rewards strategy is essential to any organization's internal development strategy.
With a good total reward strategy, companies can balance corporate expenses and employee engagement. Here is a guide to the total rewards strategy that will help you gain all the information about this strategy and assist you in creating one for your organization.
What Is Total Rewards Strategy?
The total rewards strategy is a method to manage a company's culture by offering a complete set of rewards, compensations, and benefits to its workforce. When a company adopts a total rewards program, it unifies its benefits under one roof.
It helps the organization gain recognition as a premier employer in the market and develops a higher potential to attract and retain top talent.
In simple words, an effective total rewards strategy helps companies improve business performance and accomplish desired objectives by building an engaged and satisfied team. This is why an increasing number of companies are investing in employee awards and reward programs to recognize their workforce.
What Are The 5 Components Of Total Rewards?
As per the Conference Board of Canada, currently, 90% of companies have a reward and recognition program. A total rewards model primarily includes given components. Let’s take a look.
This includes the pay (fixed and variable) that companies offer their employees in exchange for their skills, qualifications, and effort used in a given time to meet specific targets.
Compensation help employees meet their daily needs like food, clothing, and living. Employees can enjoy various compensation benefits, such as base salary, short-term variable pay, long-term variable pay, cash bonus, and stock options. Efficient compensation helps boost employee satisfaction and retention.
The total rewards framework includes a comprehensive employee benefits package. The most basic employee benefits include health insurance, disability insurance, retirement and leave plans. It may also consist of paid vacations, sick leaves, and insurance against job loss because of illness. These benefits help make the employee feel secure and happy.
3. Professional development
To harness loyalty in your employee, offering paychecks is insufficient. It is equally essential to provide them with development programs that offer an opportunity to help continue with their learning and skill development.
68% of employees agree that professional development is a significant part of workspace culture.
It includes anything from simple mentoring to career training. It also includes benefits like offering technology training. In this digital learning era, employees must consistently learn new skills to upgrade themselves, and companies should help them do so.
4. Performance recognition
According to a stat, 41% of workers state that their employers reward their workforce for their exemplary work. Hence, choosing recognition programs includes more than free schwa, benefits, and well-being. It comes in different forms, such as:
- Spot awards, tenure awards, and performance awards
- Promotions to step up the corporate ladder
- Verbal appreciation in the team’s presence with a simple "thank you."
A recognition award system includes peer recognition, respect, and appreciation for the employee. Agree or not, all employees need respect in their workspace. It helps them maintain a sense of dignity and boosts psychological safety.
READ MORE: A step-by-step checklist to prepare you & your employees for a psychologically safe workplace.
5. Work-life balance
Work-life balance describes how efficiently a company allows employees to balance their personal commitments with work obligations. For instance, employers may offer flexible scheduling so employees can pick up their children from school.
Some companies allow their workforce to come in early or leave late and use the available time to meet their responsibilities. Others offer childcare help, gym membership, or stress management programs for their personal welfare.
To promote a work-life balance, companies should develop a workplace environment that meets the staff's needs. By doing so, employers encourage employee morale and decrease absenteeism.
Why Is A Total Rewards Framework Necessary For A Business?
There are some known reasons organizations need an excellent total rewards framework.
1. Works as a recruitment manager
According to Gallup, a lack of recognition is the common reason employees leave their job. A total rewards package helps achieve two things: attract top talent and motivate them to work with their highest productivity.
It offers a holistic method for onboarding, retaining, and engaging top talent while focusing on the particular need of every employee.
Once you have the best total rewards framework, you can demonstrate the value of your benefits package to new talent to gain their trust.
2. Employee engagement and satisfaction
An engaged workforce is a satisfied workforce. Compensation should reflect the employee's work, not just their pre-defined paychecks. It should also reward the employees' productivity, hard work, and intelligence. This way, companies can boost their efficiency and satisfaction. Fairly rewarded employees work better with higher loyalty.
3. Employee retention
In another Gallup study, inefficiently recognized employees have higher chances of quitting their job. A good employee benefits package is essential for employee performance and retention.
As they say, you get what you pay for; it shows how much an employer values their employees. So you can use total rewards strategies to increase employee retention.
A salary increase is essential but not the only way to retain talented employees. In addition, companies should invest in employee training, coaching, and a better work environment to retain their best employees.
A total reward approach makes companies more competitive amongst their peer. It helps them compete for talent and become the employer of choice in their field. Remember engaged and high-performing workforce results in top-performing organizations.
According to a Gallup poll, 6 in 10 employees in the US were actively disengaged. Thus, an employee engagement program helps companies develop and sustain their teams.
Therefore, it is not just about rewarding performances and motivating teams, but understanding how an employee's efforts impact the organization's operation and including it in their total rewards strategy to develop an environment where workers feel valued, motivated, and inspired.
What Are Total Rewards Strategy Examples?
When drafting a total rewards strategy, it is crucial to check some examples to aid brainstorming. According to the Journal of Personality and Social Psychology, a small thank you by someone in authority makes people 50% more efficient and productive. Here is a list of total rewards strategy examples to help you create one of your own.
1. Compensation incentives
Rewards such as bonuses, seasonal awards, monetary compensation, and fixed salary make a good incentive in a total rewards strategy.
2. Recognition and rewards
Incentives like employee of the season or service awards work as good motivation and help boost employees' engagement and productivity at work.
Better To Know: How To Increase Productivity In The Workplace?
3. Individual benefits
These include health benefits, paid vacations, and paid sick leaves. These are excellent strategies that companies can have in their reward program. Consider things like employee wellbeing, flexible work hours for work-life balance, and personal days off to regularly outlined vacations.
4. Development opportunities
An efficient total rewards program includes professional development options for individuals and teams. Events like training, certification programs, and educational seminars are suitable for employees to grow in their careers.
Important Steps To Consider While Creating A Total Rewards Strategy
Every company is unique and has distinctive needs. Hence, when implementing a total rewards strategy, it is crucial to consider the structure and culture of the place. It may be challenging, but with a few steps, creating a total rewards strategy is simple. Adopt these approaches for your strategy that will benefit the company and its workforce:
1. Evaluate the present compensation and benefits policies
Before introducing a new total rewards compensation strategy, it is vital to assess the current program. You can check out what the company is currently offering as incentives to create something more effective for your workforce.
For instance, if you find out that the company provides a financial bonus to employees who surpass their monthly sales quote, assess more incentive strategies to make it meaningful for all.
Developing reward strategies that can fill in the gaps your current total rewards program lacks is crucial.
2. Seek help during the planning
Once you have assessed the incentives, ask for input from your team. It will help you learn the improvements the current program needs and what will work for you. Getting information from the team also allows everyone to add to the rewards strategy development.
3. Integrate and observe the total rewards strategy
Begin the new rewards strategy by sharing the changes with your team and other professionals in the workspace. Make sure your team knows the objectives and expectations to earn a reward.
4. Assess and measure strategy effectiveness
Once the rewards strategy comes into action, monitor and assess the program's effectiveness. Many important things to consider when determining the strategy's effectiveness include enhanced employee performance, overall growth, and accomplishment of company objectives.
Personalized rewards are well-taken by all employees so that companies can consider that too. According to an incentive survey, 47% of workers want a personalized award.
Rewards Go A Long Way
Building a total rewards strategy is challenging, but worth the investment. Firstly, consider what encourages your employees and strategize it accordingly.
Organizations have the chance to creatively design and strengthen their total rewards program to motivate employees. It eventually helps make the organization more competitive and enhances employee loyalty. Consider the interest of the company and employees and discover the right balance to accomplish the desired results.
When you need employee rewards like group health insurance, you know you can count on Loop. Our experts will help curate a customized policy that fits into your rewards strategies and employee needs.