Total rewards refer to a wide range of compensation, benefits, and incentives that employers offer employees for their work.
A total rewards program could include a combination of monetary and non-monetary compensation like salary, bonuses, employee benefits, rewards and recognition, workplace flexibility, and career opportunities.
Employers offer total rewards packages to compensate their employees beyond a regular salary and create a motivated and engaged workforce for long-term success.
What are the five components of total rewards?
Total rewards combine compensation, incentives, and opportunities. An effective total rewards package may include the following components:
- Compensation. All direct financial payments an employee receives, including base salary, bonuses, commissions, stock options, and equity awards.
- Benefits. Non-wage employee benefits the employer provides in addition to the employee’s base salary, such as health insurance, life insurance, retirement plans, and paid time off.
- Work-life flexibility. Any programs or offerings an employer provides employees aimed at promoting a healthy life-work balance, such as flexible work schedules, supplemental parental leave policies, remote work options, and employee support and well-being services.
- Performance recognition. Incentives that acknowledge employee achievements and contributions, including awards, recognition programs, and promotions.
- Career growth. Additional opportunities for employees to grow their skills and advance within the company, such as upskilling, mentoring programs, and career development resources and stipends.
Benefits of implementing a total rewards program
There are numerous benefits to implementing a comprehensive total rewards program, including the following:
Attract and retain talent
Total rewards are a critical recruitment tool to attract top talent worldwide and retain valuable employees, contributing to a company’s growth and success.
Aside from compensation, talent wants employment rewards that include competitive benefits, work-life flexibility, and career growth opportunities. Total rewards offer potential candidates unique employee benefits that go beyond base salary and statutory requirements.
Improve workforce engagement
Total rewards boost employee engagement and contribute to a positive work environment that promotes fairness, transparency, and recognition. Talent feels valued and appreciated and is more committed and motivated to contribute to the company’s overall success. Employees feel more accountable and encouraged to meet individual and company-wide goals.
Increase workforce productivity
Employees who are satisfied with their compensation package are more likely to be productive, motivated, and aligned with company initiatives. Rewards programs designed to incentivize good performance keep employees engaged to accomplish tasks, meet goals, and take on new challenges.
Stand out in a competitive hiring market
Talent wants comprehensive benefits that encompass financial rewards, flexibility, development opportunities, and employee well-being. Companies offering robust total rewards packages stand out to prospective, highly qualified candidates against the competition. Total rewards help businesses outperform competing companies in today’s global hiring market.
The importance of issuing a total rewards statement
Total rewards offer many benefits to employees and employers, and an effective total rewards program plays a significant role in giving businesses a competitive edge.
However, companies often fail to properly communicate their total rewards offerings to their workforce, leaving employees uneducated on how to take full advantage of the perks provided.
Employers and HR teams should be transparent about their available offerings and communicate total rewards clearly to employees.
Tips for offering total rewards to employees
Understanding how to offer total rewards is critical to attracting, retaining, and supporting your workforce. Consider the following tips for offering total rewards to employees:
1. Prioritize employee needs
Total rewards are only effective if employees use them. Regularly survey employees on what benefits matter to them to ensure the company’s total rewards meet their needs and interests. Ask for insight into what works, what needs improvement, and new ideas for an incentive program.
2. Ensure your total rewards are competitive
Compare your offerings with other company compensation packages to ensure your total rewards program is competitive. Research total rewards offered in similar industries and stay up-to-date with current market trends.
3. Be transparent about value
Convey a fair and accurate picture of your company’s total rewards program. Be transparent about the actual costs of the benefits in the program, and don’t inflate the monetary value of non-monetary benefits.
4. Clearly communicate total awards to your workforce
Share the details of your total rewards program with your employees on an annual basis, and communicate where employees can find a report of their total awards. Provide compensation and benefits statements, revisit the employee’s total awards during annual performance or salary reviews, or consider sending an updated copy during open enrollment periods.
5. Regularly revisit your total rewards strategy
Circumstances change that may impact your overall global compensation strategy, including company finances, employee needs, and market drivers. You should always revisit and audit your total rewards offering to ensure you remain competitive and provide talent what they need and want.
Monitor whether your workforce properly utilizes your total rewards program and measure its effectiveness by evaluating employee performance, productivity, engagement, and retention.
Velocity Global helps companies around the world provide total rewards packages to their distributed workforce. We craft compliant, market-specific benefits packages for your employees in more than 185 countries so you can attract top talent no matter where they’re located.
Learn how our Global Benefits solution makes it easy to offer comprehensive employee rewards to your talent everywhere.