COVID-19 Employer Resource Center


By: Sarah Shepherd on July 23rd, 2015

Print/Save as PDF

What's the Difference Between Employee Compensation Vs. Total Rewards?

Total Rewards

I’ll never forget the first time I got a Total Rewards statement. I remember looking at it thinking, “The benefits I get from these people is worth HOW MUCH?!” At the time, I was young in my HR career, still working to understand the difference between an FSA and an HSA, so seeing this blew my mind. Now, looking back on that moment, I feel obligated to tell you: that is not a good thing.

Surprises, no matter how good they seem, are not a good thing in the workplace. When it comes to total rewards, surprises mean we didn’t do our due diligence to educate and communicate with our employees about the benefits of working with us. It also shines a light on the fact that we may not be effectively communicating this information to potential hires, which is certainly a missed opportunity.

But, it can be hard to educate your team on things that you don’t fully understand. Often times, when thinking about Total Rewards, we think about one thing: pay. In reality, compensation isn’t a standalone theory – it’s a big part of the puzzle. Think of a banana split – it’s not a banana split without the banana, but it’s not just the banana that makes the dessert treat so tasty! Compensation is like the banana: integral to building the perfect dessert, and there so much else going on you need.

A typical Total Rewards program will include five key areas. They are:

  1. Compensation: In general, most employees regardless of title or role within the organization have an expectation regarding their compensation. There are a range of pay strategies that provide incentives and encourage retention.
  2. Benefits: Health and dental insurance are what generally comes to mind when discussing employee benefits. There are also many value-added benefits that can be offered within the insurance plans. Employee assistance programs, discounts on fitness programs and health incentive programs are also ways to expand the offerings to employees.
  3. Work-life Benefits: Leaders are continually recognizing the need for employees to have opportunities to enjoy their personal time off. Incorporating social activities within the work day provides the feeling of downtime, while still on the clock.
  4. Performance and Service Recognition: There was a time when employees worked their entire career for one employer. Although those days are long gone, employers are still seeking ways to recognize performance and loyalty to the organization.
  5. Career Development: These are opportunities for an employer to grow individuals while they are with an organization. The individuals will also recognize that these skills can be used to propel them to new levels in their career.

So I challenge you to think about total rewards not just as those things that reward your team for doing great work. The purpose of your Total Rewards program is to align your team with your strategic initiatives and company culture, and to then attract, retain, and engage team members through transparency surrounding compensation and other rewards.

Think about what you do to show appreciation, to make your team members’ lives easier, or even to make life after work into retirement more comfortable.  The things employees crave, like career development, flexibility, recognition, and work-life integration, are intangible – you might not pay money for it, and even if you do, it’s a drop in the bucket compared to the rest of your budget. They are still valuable benefits that should be highlighted as part of your Total Rewards program and the value communicated to your employees.

Did you find this article helpful? Here are some other articles you might find interesting: