Article: A guide to a total rewards strategy

Benefits & Rewards

A guide to a total rewards strategy

A holistically viewed and well-communicated rewards portfolio can benefit both the employees and the employers
A guide to a total rewards strategy

To enhance productivity through a Total Rewards program, the reward must be valuable to the employee and perceived as such by them


Research shows that many Total Rewards programs do not achieve their objectives, not because they are badly designed, but because they are poorly delivered


To become an employer of choice, companies have to take a holistic view of their Total Rewards, which comprises of not just the foundational rewards but also performance-based, and career and environmental rewards. Often, benefits outside the base salary do not get enough focus in Total Rewards. Yet, any of the factors can be the differentiator.  

Foundational rewards include the base salary, healthcare, retirement and insurance; performance-based rewards add up as short term and long term incentives, any profit sharing plans and recognition, and finally career & environmental rewards include career development programs, mentoring programs, talent mobility opportunities, wellbeing programs and flexibility in working arrangements. Companies cannot provide everything as budgets are getting tighter every year and HR has to increasingly justify their financial choices to the business heads in terms of returns. 

Total Rewards thus have to be designed keeping in mind the big picture. It has to be in tune with what goes with the company’s business and HR strategy, and with clarity on what aspect an organization wants to differentiate as an Employer of Choice. 

While the number one challenge for a good Total Rewards policy is cost, the number two challenge is to get the effective value out of that cost. The reward must be valuable to the employee and perceived as such by them, in order for the employer to be able to leverage their Total Rewards program towards enhanced productivity. 

Developing a rewards strategy  

When thinking about Total Rewards design, most companies use the phrase “Total Rewards” to describe the full combination of monetary and non-monetary investments they make in their workforce to attract, retain and engage the people they need to operate its business successfully.

We define Total Rewards components as having two critical identifying characteristics:

  1. Program: To be considered part of Total Rewards, the component must consist of a specific program that the company makes an investment in and manages.

  2. Value: To be considered part of Total Rewards, the component must have some specific ascribed value in the eyes of employees.

Companies need to have individual employees decide for themselves what the scheme of rewards means to them as an individual and what they derive maximum value from at that point in time. One can think of this like managing a portfolio of assets and finding the most effective and efficient combined value for employees and employer. The organization’s Total Rewards program must link the value it holds for the employee as well as the value it holds for the employer, who is going to make the investment.  

Segmentation and differentiation: One size no longer fits all. If there is a high performer and an average performer and the difference between their bonus payouts is just around 10-20 percent, it is likely to not be enough to keep the high performer sufficiently motivated. Segmentation is not only at the amount level but also as per the life and career stage. Companies need to bring in newer things which match the needs of the workplace demographics. For e.g. high performing millennials tend to look for career advancement, greater exposure and a good performance incentive plan to motivate them. It is possible that such needs and priorities shift due to life events such as marriage and family planning. Employers should develop a set of metrics through which employees are able to establish and ascribe a batch to what they value the most from the various options being given by the employer.  

Flexibility is going to be important: Companies are starting to experiment with the component of flexibility where they are performing a conjoint analysis to find out what elements or components of pay do employees want. For example, when introducing an incentive plan, they need to approach the workforce and ask questions such as how much it should be, what will motivate them, what should the elements be and how their compensation bit should look like is important. This move towards flexibility with various aspects of working is increasing. For example, policies are getting more relaxed with traffic rules like Odd-Even coming in the Delhi-NCR region and that is making the companies think about how they can reduce inconvenience to the employees and cause minimum disruption to their work. Flexibility will be an attractive differentiator with respect to becoming an employer of choice.

Technology for facilitation and Analytics for decision making: The use of technology has been very effective from a HR, and especially a Total Rewards perspective – whether it is in having software for compensation or talent management or a broader HCM platform, which can help HR become much more strategic and allow it to make more interventions efficiently. Technology can help facilitate platforms where the employee can get information about the rewards portfolios, type of rewards and benefits, the workplace and its environment and accordingly make the choices that he or she wants to make as an informed person. Technology can be leveraged for Total Rewards for dissemination of information and empowering employees to make their choices.

Coming to analytics, that time has obviously passed when the gut feelings of senior HR managers could become the basis of policy formations. Key stakeholders in the organization expect HR to provide the necessary data driven insights to identify workplace issues and even provide solutions to help solve them. Big Data and Analytics enable decision-making regarding wages and benefits, flexibility or health & well-being and to find out what employees feel, what the market trends are or what returns the employers can expect on their rewards policy innovations. 

Increasingly, it is critical to support Total Rewards programs with technology – whether this is to support effective decision making, e.g. the pay review process, or to enable analysis and reporting of the cost and value of programs or to enhance the employee experience of Total Rewards.  Willis Towers Watson research shows that companies with the most evolved EVPs focus on creating a consumer-like experience when it comes to how they communicate and how they seek to engage their employees in their Total Rewards programs.

Communication is as important as innovation: If the innovations and the investment made by the employers into their Total Rewards programs are not communicated well to the employees, it will have very little impact on the employer’s EVP or returns on business. Employees are often unaware of the benefits they are entitled to. Unless they go through an extreme circumstance that calls forth that assistance of such a benefit, that value proposition is simply text on paper. 

Except for benefits like maternity leaves, which lately receive a lot of limelight, critical benefits like health and retirement that companies spend a fortune on, do not get communicated or valued proportionally. Companies need to have conversations with employees and improve awareness so that they understand that a fair and square process determines the reward they are receiving. There is also a concurrent need to continuously push towards a culture that promotes openness and transparency about the pay and benefits system. The role of a HR leader is increasingly of a marketeer and employing effective communication across the spectrum of employer branding, features and benefits for employees and providing context of the value employees can derive for themselves. With technology available, targeting messages and having communication contextual for the recipient will go a long way to bridging the perceived value gap.

Tower Watson Rewards Study

Willis Towers Watson research shows that many Total Rewards programs do not achieve their objectives, not because they are badly designed, but because they are poorly delivered.  For example, pay for performance programs that employees do not understand; or career development programs that are not supported by efficient technology.

Employers have to begin with developing a mindset of optimizing their portfolio of Total Rewards. They need to look at what they are doing currently in rewards and assess the value that it brings to employees and whether that matches with the amount of money that they are spending to provide those rewards. 


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Topics: Benefits & Rewards, Compensation & Benefits, Technology, #RedefiningRewards

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