By: Paul Davis on September 11th, 2015

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What is the Role of Total Rewards in Human Resource Management?

Total Rewards

I’ve recently been noticing something interesting when I tell people in social situations that I work for an HR consulting company. Instead of asking whether I help organizations 'run payroll and fire people', I’ve been hearing individuals say a lot of things like, 'so, you work with new things other than pay to make employees happy, right?'

Well yes, they’ve described one piece of what I do. What they are loosely describing is actually the concept referred to as Employee Total Rewards. The fact that they separated ‘pay’ and ‘things other than pay’ is an understandable distinction, and one that’s worth reviewing in further detail.

Download an example Total Rewards statement

Understanding the role of Total Rewards in human resource management

Putting it another way, employers can view their strategy towards how they’ll excite prospective candidates and motivate employees through the lens of Total Rewards. Compensation is just a piece of that overall picture. Let's look at how you can further incorporate total rewards into your business.

It’s my experience that the best approach to Employee Total Rewards is to create a customized solution that is going to vary by company. This is where the concept of Total Rewards really becomes fun.

A great total rewards package isn't just about compensation strategies and employee benefits packages. It's about finding ways to tie your values and strategic goals to employee performance, and vice versa. Top-notch employees will be rewarded with recognition, development and opportunities, as well as with incentive pay and great benefits.

Top 5 Steps to Best Leverage Employee Total Rewards

So, how can you use Total Rewards to improve outcomes within your organization. Here are a few essential steps that will help you get the most out of your rewards strategy.

  1. Understand Your Company Culture. Your culture is going to inform the Employee Total Rewards strategy that your organization creates. For example, if your culture is all about innovation, then the rewards structure will rewards people with lots of bright ideas. If you're all about service and customer relationships, your strategy will encourage people to pay extra attention to clients.
  2. Create an Employee Total Rewards Strategy. Consider how all of the components of your Total Rewards strategy are connected. Viewing each component separately is like putting on one piece of clothing and then asking whether your outfit matches. The overall strategy is only as effective as how the different components complement each other.
  3. Customize. Consider your workforce and what motivates them. If it’s unclear what your workforce wants, it may be a good time to conduct an assessment. Then begin to consider what components you will include in your total rewards package.Try to ensure that these components are relevant to everyone in the team, and that no one's needs are ignored.
  4. Communicate. Reward programs need to be clearly communicated if you want employees to appreciate the benefits. In addition, it’s important for companies to reinforce their offers as part of their Total Rewards strategy in order to use it as a tool to attract prospective candidates, as well as to engage and retain current staff. Here are some things to consider when you don't communicate total rewards clearly.
  5. Continue to Evaluate. As with just about everything, it’s never a good idea to implement something and then walk away without evaluating performance and making adjustments. This is certainly the case with Total Rewards. Speak to local leaders and gather feedback about the efficacy of your rewards strategy. Watch out for signs that you need to review your employee total rewards.

In summary, a robust total rewards package will be custom and unique to reflect your organizational culture, align with your overall business strategy, communicated clearly and evaluated often.

Once this is in place, you'll be on your way to attracting, engaging and retaining an energetic and motivated team to help execute your business objectives. From an HR perspective, Total Rewards is the Swiss Army Knife of compensation strategies. It's a handy tool that can help out in almost any situation.

Download an example Total Rewards statement