How Can a Total Rewards Statement Help Employee Retention?
Leaders spend a lot of time worrying about making their salary structure competitive, and with good reason. Compensation is key to employee retention. If the guys in the opposite building are offering a 20% pay bump, then your employees are going to feel sorely tempted to cross the street.
Competitive salaries are an even greater concern right now. People everywhere feel unsettled after the pandemic, and around half of U.S. workers are thinking about a job change. Yet, most employers need to think about business sustainability, which means that they’re not in a position to offer everyone an enormous raise.
Fortunately, compensation isn’t just about salary. Each job offers value that goes beyond a monthly paycheck, and these benefits are collectively known as the Total Rewards package. But what appears on a Total Rewards statement?
What is a total rewards statement?
Total Rewards is the sum of all tangible and intangible benefits available to each employee. Salary and benefits are the two main components of a Total Rewards package, as well as things such as training, recognition, and flexibility.
You can place an objective dollar amount on some of these rewards. For example, health insurance is clearly priced. So is childcare, which employees can save money on if they have a flexible working schedule.
Others might be a little harder to evaluate. If you give an employee a chance to gain on-the-job experience and you acknowledge their hard work, you’re increasing their chances of earning a promotion someday, which will eventually mean a higher salary. While it’s hard to estimate the value of these rewards today, they will undoubtedly have a material benefit in the future.
Total Rewards in human resource management is an approach to assessing the value of all of these rewards. By looking at the value of all available rewards, you can give employees a clear idea of their compensation.
What are the components of an employee Total Rewards statement?
There are five main components of a Total Rewards package for employees that should appear on the statement:
- Compensation: These are all payments available to the employee. It includes base salary, commission, incentive pay, bonuses, and options.
- Benefits: Employees pay close attention to the core benefits package such as health insurance, paid time off, wellness programs, and retirement plans. They might also be attracted by relevant benefits such as legal support, Employee Assistance Programs, and other forms of insurance like dental or pet insurance.
- Work-life flexibility: The pandemic forced many employers to become more flexible, which happened in the form of widespread remote working and flexible weekly schedules. Flexibility has tangible benefits, like making it easier to manage childcare and education. Also, 94% of workers say that flexibility is beneficial to their overall well-being.
- Development: Financial support for education and certification is a tangible benefit with a precise dollar value. Employees can also benefit from other Total Rewards components like mentoring, job shadowing, and getting to work on challenging projects.
- Recognition: Incentive bonuses offer a direct benefit to hard-working employees. But there’s also great value in an official “thank you” from senior management. Recognition offers demonstrable proof that the employee can exceed expectations – something that will help them when they go looking for a promotion in the future.
For more on this topic, take a look at our long-form guide to Total Rewards:
Related reading: What Makes Up a Great Employee Total Rewards Package?
How can a Total Rewards statement help improve employee retention rates?
When employees leave, it’s often down to a combination of push and pull factors. Another employer might offer a tantalizing salary, and that can be a strong pull factor.
But the push factors are even more important. One of the most potent forces that can push people away is a feeling of being undervalued or underappreciated. It’s a common problem, with around 50% of workers saying that they feel like their contribution isn’t recognized.
Recommended reading: How to Attract and Retain with your Employee Total Rewards
1. Allows better comparisons with other employers
Imagine you were offered a choice between a cheque for $60,000, or $50,000 cash plus a car. Your decision would most likely rest on one question: how much is the car worth? If you don’t have all of the relevant information, you can’t make an objective decision.
When employees try to compare job offers, they find themselves in a similar situation. Another company might offer a substantial salary bump, but does that mean they are the more prudent option. By providing a transparent Total Rewards offering, you empower your people to make informed decisions.
2. Shows the worker’s value to the company
As mentioned above, many people feel that they are undervalued in their roles. A Total Rewards statement can help people see exactly how much you value them by outlining your investment in their services. Sometimes, just seeing the full value of all benefits and rewards can change the way someone perceives their value.
Remember, undervalued doesn’t always mean underpaid. Some people place more value on development opportunities and recognition than they do on salary and bonuses. This is especially true of people at the beginning of their careers who need help plotting a course towards the future.
3. Encourages recognition and career development
When you implement a Total Rewards strategy, you also change the way that you think about your people. After all, an employee isn’t just someone that you pay to perform a role. They’re part of a team that’s working towards the company’s long-term success. Your future is their future.
Assessing your Total Rewards offering can help you identify common issues, such as a lack of recognition or career opportunities. It can also help you come up with new ways to improve employee retention and reduce staff turnover by offering a wider range of rewards.
4. Promotes fairness across the team
Pay equity is a complex issue that involves more than just salaries. There’s also opportunity inequality, plus the internal bias that sees some people favored for training and development. Often, it’s hard to spot this kind of inequality until you see it written down.
The Total Rewards philosophy helps to ensure fairness within the team. Not only does this make people feel valued, but it shows that your company is committed to Diversity, Equality & Inclusion (DEI). With 80% of workers saying that they want to work for a company that values DE&I, fairness becomes more important than ever.
5. Makes Total Rewards more focused and appropriate
A Total Rewards strategy is not a one-size-fits-all deal. Each person has their own unique requirements. For instance, professional development is more relevant to recent graduates than to people nearing retirement age. Childcare benefits only appeal to people with kids, and gym membership is only useful for those who work out.
An employee Total Rewards statement is an excellent opportunity to start a conversation about what really matters. If you can build a rewards structure that works for everyone, you’ll be rewarded by a loyal team that sticks with you for the long run.