There's a strong relationship between how employees view their total rewards package and their overall engagement level. A study found that, among engaged employees, 60% said their total rewards are above or well above what other employers offer—while only 24% of disengaged employees felt the same way.
But why do total rewards have such a powerful impact on engagement levels? Understanding the answer can help you decide how to approach total rewards at your own organization. We’ll take a deeper dive into this question in our blog post.
Why does employee engagement matter?
High-growth organizations are obsessed with this metric, and for a good reason. Employee engagement has a significant impact on 3 key areas of your business:
Gallup found that, among actively disengaged workers in 2021, 74% are either actively looking for new employment or watching for openings, compared to 30% of engaged employees. And this trend is consistent regardless of the type of organization.
A study found that highly engaged business units see 59% less turnover in high-turnover organizations and 24% less turnover in low-turnover organizations. In other words, even at companies that lose employees for various other reasons, engagement still plays a key role.
Employee engagement has a strong link to productivity, and it’s no surprise why. When employees feel enthusiastic about their day-to-day work, they’re more likely to be focused and driven.
But when employees are disengaged, they may lack motivation and feel a lower sense of responsibility—resulting in lower productivity, errors in work, missed deadlines, poor customer service, and lower profits. As a result, a single disengaged employee can cost a company about $3,400 in lost productivity for every $10,000 in salary.
3. Business outcomes
Company leaders are well aware of the power of employee engagement. Research has found that highly engaged employees result in 21% greater profitability for the organization. That’s why 71% of business executives ranked it very important to achieving overall business success.
Understanding the link between total rewards and employee engagement
Now let's explore the relationship between total rewards and employee engagement. Total rewards refer to the compensation, benefits, equity, and rewards that an employee receives from their employer if you're not familiar. Helping your workforce understand their total rewards improve employee engagement for a few reasons:
1. Increases awareness
The more your employees understand their rewards, the more likely they view them as competitive relative to other companies.
A study found that the most understood total rewards programs—which included paid time off and base pay—were viewed as competitive. But the least understood programs—such as bonuses and career development opportunities—were less likely to be considered competitive.
In other words, by increasing awareness and understanding across all your total rewards programs, you could also see an increase in employee engagement.
2. Offers transparency
Employees often aren’t aware of how much their employers invest in them. Even if they know their base salary, they may not fully understand the value of their equity or be aware of how much their benefits cost the company.
One of the key features of total rewards is giving employees a holistic view of your investment in them. This type of transparency is great for employee engagement. A Harvard Business Review study found that 70% of workers say that they're most engaged in their job when senior leadership communicates openly with them.
3. Shows changes over time
It can be challenging to sustain employee engagement over time. Humans are susceptible to hedonic adaptation, which means that—even after a significant positive or negative event—they return quickly to their baseline levels. In other words, the happiness and excitement that an employee felt after receiving a raise 6 months ago are likely to fade.
But total rewards can help those feelings linger a bit longer. By checking their total rewards statement, your employees will be reminded of how much your organization continues to invest in them year-over-year.
The link between total rewards and employee engagement is clear. If you want more productive employees, higher retention rates, and better business outcomes, it may be time to introduce a total rewards strategy to your organization.
If you’re curious to learn more about Origin’s Total Rewards Center, request a demo. We’d love to hear from you.