Total Rewards: What you need to know

Total Rewards: What you need to know

Total Rewards: Definition

Many organizations have turned to total rewards management to provide a more holistic approach to employee benefits and rewards in todays modern world. Total rewards refer to the combination of all the benefits and rewards that an organization provides to employees, such as salary and bonuses and programs and perks such as retirement packages, health insurance, and tuition reimbursement. It also refers to the process of managing and providing these rewards and benefits.


Total Rewards Model is a framework for managing human capital that focuses on providing a complete employee experience—one that includes financial rewards, such as salary and bonuses; experiential rewards, such as opportunities for professional development and career advancement; and social rewards, such as opportunities for collaboration and teambuilding.


The Total Rewards Model is based on the idea that employees ultimately care more about their total experience with a company than their compensation alone.

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The Total Rewards Model is broad and deep; it encompasses everything a company does to support and advance the careers of its employees. It is a framework for human capital management that uses the employee experience lens to help companies assess their current state, set strategic priorities, and design and implement actions for continuous improvement.


The Total Rewards Model is used to build a comprehensive strategy that focuses on the "how" of an organization, the strategy, policies, and programs that are designed to support the organizations strategic goals, values, and culture. The Total Rewards Model is the bridge between strategy and human capital management. It is designed to help organizations design the programs and policies needed to attract, develop, and retain a talented workforce.


The Total Rewards Model uses a holistic approach to consider all the various factors that make employees feel valued and fulfilled in their jobs. The Total Rewards Model emphasizes the importance of finding the right balance between work, purpose, and culture for a more fulfilled workforce.


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Total Rewards and Motivation theories


The model focuses on the entire reward model, not just money and incentives.

Hertzberg researched 1950s job attitudes. Ten "hygiene factors" and six motivators were found (growth, advancement, responsibility, work itself, recognition, and achievement). Pay and perks are only hygienic. Total rewards inspire employees to give more.


Abraham Maslow stressed growth and self-actualization. Total rewards match Maslows hierarchy. Maslow, Ed Lawler, Peter Drucker, and Edward Demming agree on the issues that matter when it comes to driving employee motivation. Work and career opportunities, leadership, and recognition drive employee engagement and retention, not pay.

Total Rewards

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The total reward strategy

The total rewards strategy is an organizations plan for the best way to use its total rewards to achieve its business goals. The total rewards strategy is built on the foundation of the Total Rewards Model, which provides a comprehensive framework for thinking about the connection between strategy and human capital management.


The total rewards strategy provides a roadmap for making decisions about the rewards and benefits offered to employees, such as salary, benefits, and workplace culture.


Its also important to remember that a total rewards strategy is a living document, which means that it will change and evolve as your organization grows and changes. Just as the Total Rewards Model is a framework rather than a set of hard-and-fast rules, the total rewards strategy serves as a guide for making decisions, not rules that must be followed. This allows leaders to adapt the total rewards strategy to their unique situation, ensuring that their organizations total rewards programs are aligned with their business goals.


The best total rewards strategies are constantly evolving and changing as an organization grows and evolves. In the context of HR, a total rewards strategy is a document that outlines the broad philosophy and goals for an organizations total rewards programs. It includes both a broad overview of the current state of total rewards programs and a set of goals or strategic directions for the future.


In addition, a total rewards strategy can help leaders determine which programs to invest in, where to make adjustments, and how to build a culture of continuous improvement. When used as a tool for continuous improvement, a total rewards strategy can help leaders identify their current strengths, areas for improvement, and the best ways to address those challenges. It also provides a framework for evaluating program effectiveness and making adjustments when necessary.


For example, if an organizations total rewards strategy calls for investing in training and development, and an employee survey reveals that employees aren't satisfied with their training programs, the total rewards strategy can help leaders determine the best way to address that issue.


The first part of a total rewards strategy is assessing your current state. This includes an assessment of where your organization is today, both in terms of your total rewards programs and your ability to execute those programs. It also includes a clear articulation of where you want to go.


For example, suppose you want to build a reputation as an organization that promotes from within. In that case, your strategy may include a series of actions such as investing in learning and development programs for employees, creating a career development path, and providing opportunities for employees to take on bigger and more complex roles.

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Key Factors to consider in a total reward strategy

According to a survey conducted by Watson Wyatt and WorldatWork, the following important measures should be taken by companies when developing their total rewards strategy.

  1. Alignment – The total reward strategy must align with the full human capital value chain. The study found that organizations with high levels of employee performance are more successful than companies with low levels of employee performance at aligning employee behavior with the company's aims.
  2. Consider what employees want - Rewards only work if they're valuable to employees. Too many firms don't know if employees value their rewards plans. They do not check if the rewards help attract, motivate and retain employees. More organizations should consult employees about their reward preferences and utilize feedback to shape reward programs.
  3. Consider measuring and managing risk and costs - Effective reward programs balance efficacy and cost. However, too few firms formally measure their whole rewards programs cost-effectiveness. Without information, companies miss chances to improve program performance. They must grasp time-based concerns like rising skill-based pay expenses. They must be prepared to change if rewards don't change employees behavior.
  4. Work on your performance management system - Most businesses say they link pay to performance, but not enough employees see the link. Investing in manager training can deepen this link. Organizations that train managers to monitor employee performance do better on key indicators.
  5. Top performers must be paid better than anyone else- identify critical skill groups and top-performing workers, and communicate to them that their status as top performers has been recognized. You should reward those workers with significantly improved pay raises, recognition and incentive awards, and opportunities for furthering their education and professional development.
  6. Incentive-based pay is better - Making incentive-based pay a central component of the entire rewards strategy is one of the most effective methods to recognize outstanding performance while simultaneously motivating employees to reach even higher levels of success in their work. Businesses that push employees to perform better using incentive-based pay reap financial benefits.
  7. Review Incentive Funding Metrics and Targets - Short-term incentives need funding metrics. Higher-performing organizations fund short-term incentive plans more often. Low-performing organizations focus more on operating income and cash flow than high-performing firms. High-performing organizations are also more likely to include nonfinancial measures like customer satisfaction and quality outcomes. The companys priorities and goals should be reflected in incentive targets.
  8. Communication is a key priority - The employer and employer side acknowledge the importance of communication in reward management. This research shows that total rewards work when employees better appreciate the system and support them.
  9. The use of long-term incentives is important when applied to the whole organization - The research shows that organizations with long term incentive programs tend to outperform organizations without such schemes.
  10. Integrate the whole rewards value chain - Many companies don't link pay, benefits, finance, and other areas. Because of this lack of connectivity, many firms miss out on true total rewards benefits like savings in plan design and administration.

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Why use the total rewards model?

Today's workforce is more diverse than ever before. That's not only good for business, it also means that to attract and retain the best talent, organizations also need to offer a variety of rewards and benefits. The Total Rewards Model is a framework that organizations use to make sure they're offering their employees the right mix of rewards. The model is often used in conjunction with a total rewards strategy, which an organization uses to determine the best approach to take when it comes to the rewards it offers.


The Total Rewards Model is designed to help companies build a long-term strategy that connects their business goals and values to their people strategies.


What are the best practices for using the Total Rewards Model?

The Total Rewards Model is a framework, not a formula, so there is no one right way to use it. The best way to use the Total Rewards Model is to use it as a tool for self-reflection and to set strategic priorities.


How to develop a total rewards strategy

A total rewards strategy aims to create a compelling combination of pay and benefits that attracts and keeps a diverse group of employees. The goals of a total rewards strategy can be broad, such as attracting and retaining a diverse group of employees or improving the quality of jobs, or they can be specific, such as improving the on-the-job training provided to new hires or increasing the amount of employee stock options offered. The first step in creating a total rewards strategy is defining the programs goals. Once the programs goals are defined, the next step is to brainstorm ideas for how to accomplish those goals.


Developing a total rewards strategy is an important first step in designing a successful employee experience program. It defines the programs key components, including the types of rewards offered, their value, and the ways they will be communicated to employees. It also determines the programs primary objective—maximizing employee performance or improving the quality of life. Above all, a total rewards strategy sets the stage for designing a profitable and effective program.


Creating a total rewards strategy is a complicated undertaking, but its well worth the effort. A total rewards strategy is designed to provide employees with a variety of experiences that allow them to feel valued and build positive relationships with their colleagues and managers. Its a strategy that aims to address the human need for relationship and connection, and its designed to help your employees be their best selves. A total rewards strategy aims to create a culture where employees want to come to work every day because of the sense of purpose it provides them and their colleagues, not just the paycheck.


When creating a total rewards strategy, the first step is determining what your company values most. This will help you identify which employees are most essential to the business' success and which ones can be cut without much impact on the organization. Next, you'll need to identify the components of a total rewards strategy. The three major components of a total rewards strategy are compensation, recognition, and training.

Conclusion Summary

Total Rewards is the comprehensive approach to designing and delivering an employee experience. Its the philosophy that the most effective way to build and sustain a great culture is through a holistic view of the employee experience. The framework brings together the four components of the employee experience — career, financial, wellness, and community. And its the roadmap for creating a culture that delivers a better experience for employees, which in turn delivers better outcomes for the business.


Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting or visit our websites and

Memory Nguwi
Super User
This article was written by Memory a Super User at Industrial Psychology Consultants (Pvt) Ltd

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