Nowadays, a competitive salary isn’t enough to attract and retain top talent. Companies need a comprehensive total rewards strategy — detailing financial compensation, benefits, incentives, and recognition programs — to create a motivating and engaging work environment.
Having a strong total rewards strategy boosts not only reduce turnovers but also increase employee satisfaction, retention, and even work productivity. In this article, we’ll share seven key tips for developing a competitive total rewards strategy that attracts, motivates, and retains high-performing talent.
What is a Total Rewards Strategy?
A total rewards strategy is an approach that organizations use to attract, motivate, and retain employees by offering a combination of monetary and non-monetary rewards.
Total rewards strategies go far beyond a simple focus on salary and benefits and encompass a broad range of elements that contribute to employees’ overall experience and satisfaction in the workplace.
A well-designed total rewards strategy aims to create a competitive advantage for organizations by providing a holistic package of rewards that align with the company’s goals, culture, and values. It recognizes that employees have diverse needs and preferences and seeks to address those needs through various components of the strategy.
What Elements Does a Total Rewards Strategy Include?
A total rewards strategy will usually include several key elements, including:
Compensation: Although a total rewards strategy is about more than just compensation, it’s important to include it. Compensation of course is anything made up of base salary, bonuses, commissions, and any other monetary rewards directly tied to an employee’s job performance, skills, and experience.
Benefits: This encompasses a wide range of non-monetary rewards and perks such as health insurance, retirement plans, paid time off, flexible work arrangements, wellness programs, employee assistance programs, and other benefits that support employees’ physical, mental, and financial well-being.
Career Development: A strong total rewards strategy includes opportunities for career advancement, professional growth, and skill development. This can involve training programs, mentorship initiatives, tuition reimbursement, leadership development, and clearly defined career paths within the organization.
Recognition and Rewards: This element focuses on acknowledging and appreciating employees’ contributions and achievements. It includes formal and informal recognition programs, performance-based rewards, incentives, bonuses, and other forms of acknowledgment to motivate and engage employees.
Employee Wellbeing: This element focuses on creating a positive and healthy work environment that supports employees’ physical and mental well-being. It includes initiatives such as employee wellness programs, health and fitness facilities, counseling services, stress management programs, and other resources aimed at promoting a healthy work-life experience.
Why is a Total Rewards Strategy Important?
The importance of a total rewards strategy has everything to do with the fact that it can be the make or break factor in whether an ideal candidate chooses to take your job offer. An attractive total rewards offering can help attract top talent to your company while keeping existing employees happy and loyal to your organization.
Attracting Top Talent: A robust total rewards strategy can be a powerful tool for attracting top talent by offering a comprehensive package of rewards and benefits that go beyond just salary. It helps organizations stand out and position themselves as desirable employers.
Retaining Key Employees: Employee turnover can be costly and disruptive to an organization. A well-designed total rewards strategy can contribute to employee retention by providing a compelling value proposition that goes beyond financial compensation.
Supporting Organizational Goals: A total rewards strategy can be aligned with the organization’s goals, values, and culture. By designing rewards and benefits that reinforce desired performance, it can help drive organizational success. For example, if innovation is a key goal, the strategy can include rewards and recognition programs that encourage and reward innovative thinking.
Steps to Build a Total Rewards Strategy
Assess Current State
- Conduct a comprehensive audit of existing rewards: Thoroughly review your company’s current offerings, such as your salary structures, bonuses, and benefits. This will help you identify any areas of improvement.
- Gather employee feedback: Talk directly with your employees to know their thoughts about your current rewards system. This will provide you with valuable insights into what your employees actually want.
- Analyze market benchmarks and industry standards: Compare your current offerings with industry standards to see how competitive you are in the market. You can do this by looking at salary ranges, benefits, and perks offered by competitors.
Define Objectives and Philosophy
- Set clear goals: Ask yourself what you want your total rewards strategy to achieve: improve employee retention? Increase engagement? Having set goals will help you determine whether your strategy is working or not.
- Establish the organization’s philosophy on compensation and benefits: Your total rewards strategy should align with your company’s stance towards compensation and benefits. Consider whether you want to be a market leader or match industry norms when it comes to rewards.
- Align with the company’s mission, vision, and values: Your total rewards strategy should support and reflect your company’s mission, vision, and values. This alignment helps create a cohesive workplace culture that reinforces your company values.
Design the Total Rewards Framework
- Tailor your rewards: Create rewards based on different employee segments (e.g., by job role, level) within the company. For example, executives might value stock options, while younger employees might prioritize career development opportunities. Personalized rewards help make sure everyone feels motivated and valued.
- Integrating both financial and non-financial rewards: Try to balance traditional financial rewards like salaries and bonuses with non-financial rewards such as career development, recognition programs, and work-life balance initiatives.
- Be flexible and adaptable: Make your total rewards strategy flexible enough to adapt to changing employee needs and market conditions. This means you should regularly review and update your benefits as trends emerge.
Implementing the Strategy
- Develop a phased implementation plan: Once your strategy is done, implement it in phases for a smooth transition for you and your employees. This will also allow you to address any problems that may arise and make any adjustments.
- Communicate changes to employees: Communicate the new strategy and the reasons behind it to your employees effectively and transparently. Use different channels like emails, company messaging platforms, and meetings to maximize reach.
- Train HR staff and managers on the new strategy: Equip your HR and managers with the tools and knowledge needed to implement and manage the new rewards strategy. Proper training ensures that the strategy is applied consistently and effectively across the organization.
Monitor and Evaluate
- Establish metrics and KPIs: Use key performance indicators (KPIs) to measure the success of your rewards strategy. Metrics like employee satisfaction, retention rates, and engagement scores can help you assess whether the strategy is working.
- Gather continuous feedback from employees: Collect feedback from employees to gauge their satisfaction with the rewards system. The key is to regularly gather feedback to help you stay attuned to employee needs and preferences.
- Make adjustments based on feedback and market changes: Be prepared to adjust your rewards strategy based on employee feedback and market trends. Being flexible and making regular updates keeps your strategy aligned with employee expectations and business goals.
Best Practices in Total Rewards Strategy
- Incorporate employee preferences and diversity considerations: Try to truly understand what your employees value most, which can depend on their backgrounds and needs. Offer a mix of rewards — like flexible work hours, parental leaves, or cultural celebration days — so that everyone will feel included and appreciated.
- Ensure fairness and transparency in reward distribution: A reward system that is fair and transparent will help make employees more satisfied in their work. You can ensure this by clearly communicating how rewards are determined, whether it’s through performance metrics, tenure, or other factors.
- Consider new types of rewards: Introduce new and innovative rewards to make your company more attractive to both current and potential employees. These kinds of rewards can help contribute to your employees’ overall well-being and growth, which can, in turn, benefit the company.
Case Studies and Examples of Competitive Total Rewards Strategy
Here are some real-life examples of successful total rewards strategy implementation:
- Google: Perhaps one of the most popular examples is Google.They have a high employee retention and engagement rates and one of the biggest contributing factors is their competitive total rewards strategy. Aside from providing competitive salaries, Google employees also enjoy extensive healthcare benefits, and non-traditional perks like on-site wellness programs, free lunches, flexible work schedules, and more.
- Salesforce: Salesforce is known for their “ohana culture,” where they promote a sense of inclusion through benefits like generous parental leave, volunteer time off, and professional growth opportunities. Their total rewards strategy takes a holistic approach that emphasizes not just monetary compensation but also career development and community involvement.
- Samsung: Samsung’s total rewards strategy is designed to attract and retain top talent through competitive compensation, comprehensive benefits, and a focus on innovation and career development. They offer a wide range of perks, including health and wellness programs, retirement plans, and opportunities for international assignments. They also provide their employees with access to advanced training and development resources.
Here are some lessons learned and key takeaways from different industries when it comes to developing effective total rewards strategies:
- Personalize your offerings: A one-size-fits-all rewards package may not meet the diverse needs of your workforce. Tailor employee benefits to different employee groups to potentially increase satisfaction and retention.
- Consider your employees’ well-being: Companies investing in wellness programs, mental health support, and work-life balance programs tend to have higher employee engagement and productivity and an overall more positive work environment.
- Be inclusivity: Providing benefits like equal parental leave for all genders and supporting diverse employee needs creates a more inclusive workplace. It also attracts diverse talent and fosters a culture of respect and equality.
- Adapt to market trends: Be open to new types of rewards, like flexible working conditions or unique perks. Keeping updated with industry standards and trends in employee benefits can help keep your company competitive.
- Communicate with your employees: Clearly communicating how rewards are determined and distributed creates trust between the management and employees. Employees are more likely to feel valued and motivated when they understand the reward system.
In Summary
Having a competitive total rewards strategy can help you attract, motivate, and retain top talent. Additionally, recognizing and rewarding employee contributions creates a more positive and driven workplace environment. As real-life studies have shown, the most successful total rewards strategies are those that have a well-rounded approach to providing employee rewards, which includes both financial and non-financial incentives.
Creating a comprehensive total rewards strategy requires a clear and well-defined organizational chart to effectively allocate rewards, identify key roles, and understand reporting structures. If you don’t have an org chart or need to update your current one, consider Organimi, a cloud-based tool that offers a variety of customization features. With Organimi, you can build org charts tailored fit to your organization’s needs in just a few minutes. Sign up for a free trial to explore its features.