TOTAL REWARDS

Total Rewards

Total Rewards

Introduction

For many years, rewards programs were viewed primarily as a necessary evil to attract and retain competent employees. Although the people costs of running a business average nearly 40 per cent of revenues, rewards programs were not always aligned to reap the greatest return on this considerable investment. Attitudes towards rewards programs, and awareness of their strategic value, are now changing. Increasingly, organizations are realizing that a properly designed and executed total rewards strategy can be a powerful driver of business success. Conversely, if left unattended and misaligned, rewards program elements can clash with each other and potentially undermine the success of an organization's business strategy.

Employers have the opportunity to leverage the value of their total rewards program to provide solutions to key business challenges such as the aging workforce, competitive changes in the marketplace and the need to maximize the value of business mergers and acquisitions. Employers are also realizing that they can't merely mimic the rewards practices of other organizations. A rewards strategy must be deliberately created to support an organization's unique human capital strategy. Consider, for example, the case of a leading Canadian manufacturer. This company operates under contract to an original equipment manufacturer, so it faces the challenge of attracting a flexible workforce. It needs highly skilled workers, but is also confronted with irregular client demand for production. Without the guarantee of a fixed employment term, how was this employer to create a value proposition for these contingent employees?

The employer turned to total rewards and designed a customized solution. Employees were offered flexible hours, shifts that started after their children left for school and benefits for part-time workers. This manufacturer used its rewards program to differentiate itself from competitors. This chapter examines the changing definition and role of total rewards. It articulates the need for integrated total rewards programs that are affordable, sustainable and connected to business goals. And it explains how organizations can think more holistically in creating programs that best fit their unique human capital and business strategies. Ultimately, the total rewards package must influence employee behaviour and attitudes in response to shifting business needs.

Total Rewards Redefined

In the past, rewards usually mentioned to pay. Today, the definition of rewards encompasses the overall value proposition that the employer offers to the employee. It's a total package that includes compensation (comprising of base pay, short-term incentives and long-term incentives), benefits (including health, retirement and work/life benefits, which account for an increasing portion of the rewards package) and careers (including training and development, lateral moves, stretch assignments and career incentives).

This broader definition of rewards corresponds closely with employees' actual experiences. When contemplating paid work with one business versus another, or when contemplating a new opening with their present employer, employees tend to believe in periods of “What's the general worth of the deal throughout my tenure with the organization?”rather than just “How much do I profit from now?” or “What are the retirement benefits?” Bringing all of these different rewards ...