The HR profession is full of phrases, words, buzzwords, and acronyms that are difficult to understand for beginners in the field. One such word is total rewards. This blog covers rewards and everything you need to know about it as an HR professional. So, read on to find out.
What are Total Rewards?
Several organizations use rewards in an attempt to use a more holistic approach to employee rewards and benefits.
As the name suggests, total rewards are the combination of all the rewards, benefits, and incentives offered to employees by a company, including salaries, bonuses, and other programs and perks like health insurance, retirement plans, and tuition reimbursement. Besides tangible rewards, total rewards may also include access to career opportunities, workplace flexibility, and more.
Total rewards also refer to the management and provision of these benefits and rewards. In simple words, in the combination of extrinsic and intrinsic rewards an employee receives in an organization. Total rewards are an effective way to build a strong and positive relationship with employees.
Businesses require a large-scale approach that promotes organizational change to successfully design, implement, and monitor a total rewards system. The success of the total rewards highly depends on the support of top management and executives.
Moreover, to ensure your rewards strategy meets the requirements of everyone at the table and is well-rounded, both front-line workers and key decision-makers need to be involved in the process.
It is critical to realize that collective bargaining can significantly impact how your plan is carried out if you work in a union environment.
How to Implement a Total Rewards Strategy?
A total incentives strategy’s effectiveness is not just determined by the perks you offer your employees. It would be best to judge its success based on its ability to attract, inspire, motivate, and retain talented employees. Here are some tips on implementing a total rewards strategy:
1. Evaluate The Total Rewards You are Currently Offering
Before developing a new total rewards strategy, it is important to assess the effectiveness of your current strategy in attaining your organizational goals. One way to do this is by handing out survey forms to employees to learn about their opinions and perceptions on their pay, perks, and opportunities for professional advancement.
According to a study, 70% of employees said they would consider perks or fringe benefits when searching for a new join. Answering the following questions will allow you to determine the strengths and weaknesses of your total rewards plan:
- How do employees feel about the current total rewards system?
- Are all employees eligible for the total rewards system? If not, identify the ones that are.
- Which behaviors and achievements merit rewards?
After gathering the relevant data, you must compare it with two areas. Firstly, determine if the rewards are reasonable compared to one’s given to the other staff members. Secondly, also assess if the compensation is rational considering present-day market conditions.
2. Determine The Components You Want to Offer
Once you have assessed your current total rewards system, the next step is determining the elements you want to add to your new strategy. You must ensure the process of allocating rewards is fair and balanced. Determine which benefits you want to offer each department and the number of rewards to want to offer toward different objectives.
Most businesses establish a single goal they hope to achieve due to the total rewards system. These include
- Work-life balance
- Employee satisfaction
- Professional development
- Increased productivity
- Performance recognition
Plan your rewards strategy by focusing on the elements that will inspire and meet the demands of your employees. You will also learn more about your employee’s top priorities and how to retain them through this process.
After preparing the rewards system outline, it is time to execute it and communicate it to your employees. The best way to do this is to issue a detailed policy document regarding the new policy. You should also hold meetings to ensure all the employees understand them clearly.
2. Evaluate the Effectiveness of Your Total Rewards System
Once you have successfully executed the rewards system, evaluate its effectiveness. Doing so will help you determine if you need to make any amendments to the plan. There are several metrics you can use to assess your total rewards strategy. These include:
- Employee productivity
- Employee turnover
- Absenteeism rates
- Employee motivation
- Overall business process efficiency
The Advantages of a Total Rewards System
Here is how having a total rewards strategy can benefit your organization:
- It motivates employees to work harder, improving their productivityand overall efficiency.
- It aids in employee retention and, thereby, the employee turnover rate.
- Since employees are motivated and happy at their workplace, it results in lower absenteeism rates.
- By offering perks and benefits to all employees, your organization can become the employer of choice. Therefore, giving you wider access to the top talent compared to your competitors.
- It allows employers to communicate the value it offers to employees effectively. Most employees are unaware of the expenses that perks like pensions pose for the firm. Therefore, to tackle this, you can offer total reward statements to employees, mentioning the value of their rewards.
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