The traditional definition for total rewards is the financial and non-financial rewards an organization offers employees for their time and work.
Because of this definition, most leaders immediately think of compensation and benefits as the foundation of their total rewards.
However, compensation and traditional benefits (such as insurance, 401(k), paid holidays, etc.) perhaps shouldn’t be considered in a total rewards strategy conversation. That may sound controversial, and for good reason.
Total rewards strategies have been around for decades, but with relatively few changes. It’s time to revisit them.
Total rewards is inclusive
Consider the difference between the words “reward” and “expectation.” A reward is something exciting, possibly unexpected, and it’s given to thank someone for their efforts. An expectation is an obligatory certainty — when something is expected, it’s unsurprising and probable to happen.
Ask around and see how your employees think about comp and traditional benefits. Most employees think of them as expectations, not rewards. And total rewards strategies need to change to reflect that mindset.
Difference between expectations and rewards
Equal treatment, mutual respect, and a safe, wholesome work environment are things employees expect. Employers provide those benefits because it’s the right thing to do and because employees deserve to be taken care of—which is why no one generally considers these to be part of total rewards.
A competitive salary, health insurance and 401(k) benefits are the same — employees expect them, and employers provide them because they want to take care of their employees’ basic needs.
Rewards, on the other hand, are the extra perks that can set your organization apart. That includes things like:
- plenty of employee recognition
- professional development opportunities
- wellness support
- a focus on work-life balance, and
- a supportive and value-driven culture.
These are the true aspects of total rewards. These are perks and benefits that every employee wants, but, unfortunately, not many expect. They’re not related to employees’ basic needs, but they are related to employees’ overall well-being and happiness.
With this small change of mindset, we can see that compensation and traditional benefits are in the category of meeting employee expectations. They are the strong foundation that total rewards should be built on.
Get leadership buy-in
The biggest challenge many HR professionals and leaders face in rethinking total rewards is getting decision makers to buy into the idea. However, there are strategies to make an updated, modern total rewards strategy appeal to everyone, from executives to employees.
1. Focus on non-monetary improvements
When trying to improve compensation and benefits, money is a big factor. There’s no other way to improve salaries other than giving people more cash, which may lead to some pushback when trying to improve total rewards.
However, consider some of the other aspects of a modern total rewards strategy:
- Employee recognition. Training managers on how, why and when to recognize employees is completely free. Creative ways to encourage recognition, such as card writing stations around the office or a wall of fame, are budgetary lightweights as well. Creating a more appreciative culture doesn’t have to cost a dime.
- Work-life balance. Offering employees more flexibility is a free way to drastically improve work-life balance for employees. More PTO, floating holidays or variable schedules are awesome total rewards additions, and they are relatively cheap, too.
- Professional development. An internal mentorship program is a great way to help employees gain new skills and responsibilities without adding to your budget. Training courses, industry speakers and self-directed learning are other great options.
- Employee wellness. Support employee well-being with wellness incentives, healthy snacks or gym reimbursements. One of the best ways to encourage wellness is to allow for wellness activities as part of their work time, instead of in addition to it.
More budget doesn’t need to factor into an improved total rewards strategy — and inexpensive improvements are a great way to get leadership support.
2. Increase existing budget efficiency
Most organizations already have a healthy budget for total rewards, but that doesn’t mean that their total rewards strategy is effective. Instead of thinking about how you can add more money for improvements, consider how you can use your existing budget in a better way.
For example, one of the best things you can do is ask employees which perks they like the most and which they don’t use. Chances are, some of the money you’re spending is going toward a perk that isn’t having much of an impact.
Redistribute your total rewards budget based on the feedback you get — aim to make every cent of your existing total rewards budget as impactful for the greatest number of employees as possible.
When aiming to get leadership buy-in, you have to speak leadership’s language. And ROI is something every leadership team is fluent in. Consider these ROI benefits for different aspects of a modern total rewards strategy:
- Employee recognition increases employee productivity and performance by 14% while increasing employee loyalty and engagement by 3X and 4X respectively
- 71% of employees agree that professional development improves their job satisfaction, and 68% of employees would stay at a company for their entire career if the company helped them learn and grow
- Schedule flexibility leads to 3X happier employees, and work-life balance benefits improve morale and retention levels, and
- Work culture is 10X more important to employees than pay, and 9 out of 10 employees would take a pay cut if it meant having more meaningful work.
Focus on the returns that come from investing in modern total rewards—they’re impressive no matter how you look at them.
Total rewards is the differentiator
The work environment has been changing and continues to change, and employee expectations are evolving with it. Compensation and benefits aren’t enough to retain and satisfy employees anymore — they’re expectations, not rewards.
With a reimagined total rewards strategy that leadership has bought into, organizations can create a workplace where employees feel valued, supported and trusted to perform their best.