By: Amy Dozier on April 4th, 2014

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The Benefits of an Employee Total Rewards Philosophy Statement

Total Rewards

I recently worked with a client to conduct an employee engagement survey.  The results of the survey indicated that employees felt they were not paid competitively and that the bonus opportunities available to them were not incentivizing.  The leadership did not really understand why employees feel this way because they felt they had done all the right things. 

They had recently conducted a compensation analysis and made adjustments to employees whose salaries were below market.  They had also worked really hard to develop an incentive program to reward employees for their contributions to the organization. 

Download an example Total Rewards statement

Regardless of their efforts though, employees did not feel their compensation programs were motivating and the leadership wanted to change the perception. So in response, they asked us at Helios HR to revamp their bonus programs.

What is a Total Rewards philosophy? 

A Total Rewards philosophy is the mission statement at the heart of the employee experience. This philosophy guides all decisions related to employee rewards, and ensures that you keep your team focused on the company's goals, values and overall strategy.

Each company has its own Total Rewards philosophy, but it will generally cover elements such as: 

  • Scope of employee total rewards programs
  • Employer's commitment to team members
  • Main expectations for employees
  • Details of how Total Rewards relates to organizational culture

Every organization has a Total Rewards philosophy. But only some organizations choose to formalize that philosophy in a written statement. 

Introducing the Total Rewards philosophy statement

As I talked about the scope of the project with the client, it became clear to me that the employees did not feel incentivized by the programs, not because of the programs themselves, but because the program was never communicated to them. 

The root of the problem was that employees just didn’t understand why they were compensated the way they were and how their bonuses were derived.

Instead of revamping the programs they had worked so hard on, I recommended the development of a formal Employee Total Rewards philosophy that would lay out the principles to guide the design, implementation, and administration of their human capital programs. 

Once their philosophy was documented, they could use it to ensure their current programs were aligned and then to help communicate with employees.

The Benefits of Creating an Employee Total Rewards Philosophy Statement

Total Rewards, as defined by WorldatWork, isall of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship.”

Formalizing your philosophy does the following:

  • Defines human capital strategies and aligns with strategic goals and objectives, business model, and company culture
  • Attracts, motivates, and retains employees by providing transparency on how the organization approaches compensation
  • Provides guidelines and a system of accountability that drives consistency across the organization so employees perceive fairness and the company mitigates legal risk
  • Allows the organization to balance market competitiveness and cost control

Developing a Total Rewards philosophy is a critical element in ensuring that you, as an organization, have a tool to help you drive human capital decisions and communicate those decisions to employees. 

Your transparency will go miles when it comes to building trust with your employees.  When they understand that you have a total rewards philosophy and they feel they are being paid fairly, you will have a much easier time attracting, engaging, and retaining your workforce.

Further reading: How to attract and retain with your Total Rewards for employees program

Download an example Total Rewards statement