I get a gift basket each year from my financial advisor, with something for everyone. My wife goes for the pistachios, I go for the chocolate-covered stuff, and my daughters pick away at all of it. Employers face the question of what to put into their rewards gift basket, given the available budget. We try to cater to all, don’t we? What is the key? We must consider the full spectrum, we must take the total rewards approach.
Total Rewards is everything an employee receives in return for their work. It includes compensation, benefits and a broad range of partially tangible and intangible rewards (such as work-life, recognition and growth opportunity) that enable organizations to attract and retain talent and align efforts behind the vision and mission and strategy. Why do we include intangible within rewards? One very big reason and one very small reason:
- Big psychological impact–consider the power of team recognition, being trusted to work flexibly, a learning opportunity, having a mentor, a respectable job title, being empowered. Lack of these accounts for a large number of resignations, agree?
- Very small cost–unlike salary, allowances, bonuses and incentives, health insurance and retirement which comprise the largest overhead expense category for most organizations, intangibles cost very little, sometimes nothing at all.
Total rewards concepts take compensation and benefits to a new level, building upon basic objectives (internally equitable and externally competitive, or attractive v affordable) to multi-dimensional, adding behavior change (join, stay, perform, grow, innovate, etc.) as specific outcomes to which specific reward practices can be aligned. How do we compete for talent without getting into a salary “bidding war” which no one can afford? The answer is: take the total rewards approach. You still must compete on salary, but for many people, the benefits, work-life and other areas can be a tie-breaker as long as pay is “enough.”
Sopar Marpaung, CTRP, Head of Human Resources at Indonesian steel maker Gunung Raja Paksi says “In traditional minds of people, the talents will still look at the total cash they’ll take home every month before they decide to join you or not, UNLESS the “Package” is promoted and branded as their life or career solution in the mid- to long- term. In a business perspective, rewards impact should be measurable like an investment of happiness, engagement, and productivity of people.”
“Rewards impact should be measurable like an investment of happiness, engagement, and productivity of people.”Sopar Marpaung, CTRP
Look at the whole package, not just pay:
- benefits can be made more inclusive, more flexible, more compassionate–these can cost money, but there are ways of saving to offset this cost
- work-life goes way beyond working from home and includes anything we do to help people with life apart from work
- recognition seeks to ensure model behavior is noticed and appreciated. Costs range from nothing (“thank you, well done!”) up to about 1% of payroll for cash or merchandise recognition programs
- growth and development opportunity tell candidates you offer a career, not just a job. Career opportunity represents future compensation.
- learning literally feels good. Research* finds release of pleasurable neurotransmitters in connection with learning
- performance is what creates employment and income opportunity for all, and we drive the alignment of rewards to support it
- finally, the work itself–meaningful work, achievement, being challenged–these are what motivate, according to Herzberg’s two-factor theory
Can you afford not to take the total rewards approach? Can you compete on salary and benefits alone? There are at least 100 specific reward practices to consider. (See What’s in Your Rewards Toolkit)
Learn the art and science of total rewards, get real behavior change, and ease the task of attracting, retaining and motivating your talent.