Right now, the competition to attract and retain top talent is fierce. Between the Great Resignation and the increased focus on well-being at work, employers are trying to find ways to take their compensation and benefits to the next level.
It’s not enough to offer a high salary and comprehensive benefits package to your employees—they also have to understand the value of these offerings. The best way to accomplish this is with a total rewards strategy. We’ll explore the most common questions we hear about total rewards.
What are employee total rewards?
Total rewards refer to the compensation, benefits, and equity and rewards that an employee receives from their employer. Total rewards typically include things like:
- Base salary
- Equity compensation
- Bonuses and commissions
- Medical, dental, and vision insurance
- Financial and retirement plans
- Learning and development budget
- Paid time off
While this isn’t a comprehensive list, it should give you a sense of what’s included in calculating employee total rewards. Some organizations also choose to define total rewards as anything that falls under these five pillars:
You can decide exactly how you want to calculate total rewards at your company.
What is the difference between total compensation vs. base salary?
Total compensation only refers to the various forms of compensation an employee receives from their employer. In other words, it doesn’t account for things like benefits. Typically, total compensation includes an employee’s:
- Base salary
- Bonuses and commissions
- Equity compensation
An employee’s base salary refers to the amount workers are paid before taxes, and it doesn’t account for raises, bonuses, or benefits.
Why are total rewards important?
You might be wondering why total rewards are so essential. How does it help you or your employees to know the total monetary value of their compensation and benefits packages?
Here are 3 reasons why:
1. Helps you attract talent
When a candidate receives competing offers, it can be challenging to weigh the differences. One company may offer a lower base salary but fantastic benefits, while another may provide a significant amount of equity compensation but no cash bonuses.
In this situation, it can make a huge difference to show candidates their total rewards—in other words, the total monetary value of your offer—so they can fully understand how much you’re investing in them.
2. Retains your best employees
Organizations provide employees with total rewards statements for a variety of reasons. It can be easy for employees to overlook how much their employer invests in them—beyond their base salary. A total rewards statement allows them to take a holistic view of how valued they are, making it a powerful retention tool.
3. Demonstrates the company’s continued investment
Finally, total rewards can also help employees keep track of changes over time. For instance, let’s say one of your managers will receive a promotion, raise, and bonus in 2022. By looking at their total rewards statement from 2021, they’ll be able to see how much your organization continues to invest in them year-over-year.
How to build a total rewards strategy for your workplace
Now let’s talk about how to build a total rewards strategy. This is a system that motivates employees by rewarding them with various benefits, growth opportunities, and compensation methods that are tied to specific behaviors. Most organizations use a four-step process when building or revamping their total rewards strategy.
1. Assess your current offering
If you already have a total rewards program in place, your first step will be to assess your current offering. This will help you decide which parts of the program you want to keep and which aspects you may want to revamp. Specifically, you’re trying to identify what works and what doesn’t when it comes to your existing total rewards strategy.
At this stage, it may be helpful to ask your employees for feedback—whether that’s through a survey or 1:1 conversations. You can ask them questions like:
- Do you think that our current total rewards program is fair? Why or why not?
- Is it clear what types of behaviors are tied to rewards?
- Do you feel motivated by our total rewards program?
- What could we improve about our approach to total rewards?
2. Design a total rewards system
Once you finish the assessment, it’s time to design the actual system. This stage aims to decide how and when to reward employees. In other words, which behaviors or achievements will map to a specific reward—whether that’s a cash bonus or a critical learning and development opportunity? It may be helpful to use the five pillars we mentioned before as a foundation:
This step is critical because it creates clear expectations around what employees need to do to be rewarded. Without a structured system, your organization may be more prone to biased and subjective assessments of an employee’s performance.
3. Execute the plan
Now it’s time to roll out your new total rewards program to the rest of the organization. There’s a lot that needs to happen at this stage, including:
- Creating a launch plan to get employees excited, informed, and engaged
- Distributing materials about the new program
- Training managers and leaders about how the total rewards system works
- Collecting feedback early on to gauge awareness and understanding
Don’t be too concerned if you run into roadblocks in this step! This is to be expected, and the early stages of the launch are the perfect time to address any issues and make the appropriate changes.
4. Evaluate your strategy
As with any other HR program, you need to evaluate the effectiveness of your new total rewards strategy. Does your workforce feel more motivated by the program? How do employees feel about it? Are managers using it appropriately?
These are all questions to ask. You can determine the answers by conducting surveys, collecting feedback, and looking at metrics. Make sure to communicate any results to key stakeholders at your organization so they understand what’s going on with the program.
Best practices for your employee total rewards
Whether this is your first or tenth time building a total rewards strategy, here are a few best practices to keep in mind:
1. Choose benefits your employees care about
When choosing the benefits for your total rewards program, ask yourself: is this actually something our employees will value? For instance, if you already have an unlimited vacation policy, offering extra paid time off will be meaningless and fail to motivate your employees.
On the other hand, if your employees are curious and growth-minded, offering them the opportunity to go to a conference or take an intensive course to uplevel their skills can be highly impactful. Understand what your workforce wants and ensure your total rewards program offerings align with that knowledge.
2. Have all the information live in one place
There’s a lot of information that goes into calculating total rewards. For this reason, it can be helpful to have everything live in a single location that your workforce can easily access.
With Origin Total Rewards, we equip our customers’ employees with an easy-to-read dashboard that allows them to understand the value of their salary, benefits, and equity at a single glance. Our dashboard also tracks year-over-year changes so people can see how your investment in them grows over time. Not only does this empower your employees to track their own total rewards, but it also saves your team time since you won’t have to answer endless questions about benefits and equity compensation.
3. Integrate with your financial wellness benefits
Finally, if possible, try to integrate your total rewards dashboard with any existing financial wellness benefits. This allows your employees to access all their financial information, resources, and tools in a single place.
For example, with Origin, your employees have access to 1:1 sessions with our Certified Financial Planners. These financial professionals can see the Total Rewards Center of each employee and provide more personalized guidance based on everyone’s individual situations.
With companies introducing higher salaries and new benefits every day, total rewards are becoming a must-have in the HR world. If you’re curious to learn more about Origin’s Total Rewards Center, request a demo. We’d love to hear from you.