What is total rewards?
Total rewards is a system that looks beyond the paycheck and examines the comprehensive benefits an employee receives, or that an employer offers. Some companies take time annually to send their employees a “statement” that delineates these tangible rewards like: tuition reimbursement, PTO, cell phone allowance, alongside their actual compensation.
Some people come by their total rewards packages internally, building them specifically to attract a certain type of employee. For example, an organization that values ongoing learning, might offer a generous conference or learning stipend. Another which values seasoned workers might create a lucrative retirement plan that increases in value the longer the employee is with the company.
The benefits or perks your company offers can be:
- Tangible (e.g. health, vision, dental, PTO) - These are benefits that have a real-world cash equivalent. Your employer pays a specific price for these benefits that’s not easily disputed.
- Intangible (casual dress code, in-office snacks, work-from-home options) - These are benefits that have a subjective value to the employees. For example, one entry-level worker may appreciate a casual dress code because a more formal workplace dress policy would force her to purchase new clothing before she ever received a paycheck.
Why bother offering a TRS or Total Rewards Statement?
As the talent acquisition market heats up and retention flies to the forefront of HR Pros’ minds, a total rewards statement can be a powerful tool during performance reviews or when making counter-offers. Employees are unlikely to accurately gauge how much those benefits are worth. Enter the Total Rewards Statement.
There are other benefits to offering a Total Rewards Statement like:
- Increasing employee engagement: Showing your employees their value to the organization makes them more aware of how much the company believes in them and supports their career growth.
- As a performance tool: Recently, we learned that members of our sales team are motivated by the benefit of working from home. Sales management worked with HR to roll out a plan that includes the ability to earn work-from-home days as part of our total rewards.
- Increase awareness and appreciation for benefits: If you could talk to the CFO of your company, he or she would want to ensure that every dollar going into benefits was communicated and appreciated by your employees. A TRS does just that.
- Helping retain your top performers: When your people get other offers, you want them to consider the whole package, rather than making a jump for a 10% increase in pay. TRS can help them understand that they may not get 4 weeks vacation or the option to use a $1000 learning credit toward sharpening their own skills. In short, it assists them in comparing like to like.
- Attract new workers: A TRS requires you to spell out exactly what you’re offering your employees and address any holes or inequities. This makes it much simpler when you tackle developing your Employee Value Proposition or even when building a simple job advertisement.
What should be included in a Total Rewards Statement?
- Fixed or Base Pay
- Variable or Performance Based Pay
- Short-Term Incentive Pay
- Long-Term Incentive Pay (stock options, restricted stock or performance) shares
- Overtime Pay
- Health Insurance
- Dental Insurance
- Vision Plans
- Employee Assistance Programs
- Pre-Tax and Retirement Benefits (401K, IRA, HSA, Social Security, Medicare)
- Under federal law, employers must pay a 1.45 Medicare tax on all earnings and a 6.2% Social Security tax on earnings up to $117,000 for their employees.
- Employee discounts
- Health Incentive Programs
- Disability Plans
- PTO or Vacation (holidays, vacation, sick leave, bereavement, and jury leave)
- Required or mandated(FMLA, workers’ compensation, unemployment benefits)
- Work-Life Benefits:
- Work-flex options
- Job sharing
- Paid and unpaid time off
- Working from home or Telecommuting
- Volunteering Programs
- Company Social Offerings
- Paid Holidays
- Performance Recognition:
- Service awards
- Retirement awards
- Peer recognition awards
- Spot awards
- Managerial recognition programs
- Organization-wide recognition programs
- Exceeding performance awards
- Employee of the month/year awards
- Appreciation luncheons, outings, formal events
- Goal-specific awards (quality, cost-savings, productivity, safety)
- Employee suggestion programs
- Weekly manager and direct report meetings
- Performance evaluations
- Succession or Career Path Opportunities:
- International assignments
- Internal promotions or transfers
- Succession planning programs
- Tuition reimbursement
- Corporate universities and mentoring programs
- Seminars workshops and conferences
- Online learning and webinars
- Self-development courses
- Leadership training
- Special benefits:
- Technology assistance
- Meals or cafeteria plans
- Childcare programs
- Uniform expenses
- Holiday bonuses
- Health club memberships
If that seems like too many categories to itemize out, it’s okay. You really just need to ensure you get the basics in there. While creating a Total Rewards Statement can be as simple as creating an excel table, there are companies who will help you prepare these statements.
Most experts recommend breaking down total compensation, so your employees can see how much of their compensation is salary versus benefits. Communicating these items is important, however, as Towers Watson research shows, employees underestimate the value of their total rewards package by up to 70%.
How and When Do I Communicate Total Rewards?
The great thing about communicating your employees’ total rewards is that it needs no specific time. While many companies tie these statements in with performance reviews, that can be a relatively busy time of year for most. Instead, you could pick a time when you typically see a lot of turnover or prepare the TRS just in time for campus recruiting season. It’s really up to your organization’s unique needs and schedule.
How you communicate these rewards and benefits is even more important. If you send these out to employees without preamble, there is the possibility of miscommunication. Instead, invest the time to write a letter and get it approved by a C-Level executive. Create a TRS that is easy to read, clear and provides an understandable total.
Compensation is always a tricky thing, so send as an email with the statement as an attachment or with a link to a cloud-based system where the TRSs are securely housed. To communicate more clearly, state in the body of the email what a TRS is, how they should read it, instructions to securely access this document and any printing or security instructions you may have internally.
ClearCompany has been a pioneer in HR technology for over a decade. We understand that an excellent talent management strategy includes well-managed talent administration to effectively reward and administer benefits for your employees. Chat with us today to see how you can leverage Benefits Administration within the ClearCompany platform.