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How Creative Total Rewards Help You Attract Better Talent

For small and medium-sized businesses, competing for talent is tough. The market is tight and expectations from candidates and employees are high. One way to think about this challenge is to imagine every person who has the skills you need as a person looking for pizza.

What type of pizza do they like? Thin crust with anchovies or one of those crazy Hawaian pizzas with pineapple and ham. Well, the reality is people often have a specific set of things they want on their pizza, and even a small, local pizza parlor needs to provide the set of options customers want.  If a pizza parlor provides the expected set of options along with great service, they can thrive against national chains who have cheaper prices.

The same is true for businesses trying to attract and retain talent. They need to offer the right options on their total rewards menu to appeal to the talent they need. Following this analogy, what are the components of the total rewards menu and what should you select for your company?

Total Rewards Menu

WorldatWork defines Total Rewards to “include everything the employee perceives to be of value resulting from the employment relationship.” We break them into three components:

   
The sum of all categories received by an employee represent that employee’s total rewards package. For example: a top-performing employee earns $40,000 in annual base-pay. She also receives a bonus of $3,000 and salary increase of $2,000. Her health insurance paid by the company was $3,600. Additionally, she gets paid time off, reduced price for gym membership, employer-paid parking, and training and development opportunities, which amount to $12,075. All of this brings the annual total rewards value for this employee to $60,675 (52% above her base pay)

Going back to the pizza analogy, think of Compensation as cheese pizza, Benefits as toppings, and Work Life as crust and cooking options. Some companies think everybody likes cheese pizza and just focus on pay. This approach is not attractive to those who only like pepperoni pizza. Other companies will provide the benefits and work-life options that reflect the owners/operators tastes. All employees want to pay high premiums for a very rich health plan right? That often doesn’t work well for entry level staff, who typically can’t afford insurance at all. So what is the right approach, especially knowing that your pockets aren’t quite as deep as large employers and you don’t have the buying power or internal resources to manage numerous options?

Considering the many nuts and bolts of total rewards, it’s important to create a holistic strategy that can be used for implementation and improvement.

How to Build a Total Rewards Strategy

  1. Assess the value of your existing rewards program. As shown in the example above, you will need to add all the rewards being granted to employees to get a full grasp of what they are receiving and the value to the employee (which may be higher than the cost to the company).
  2. Benchmark pay to ensure your compensation is competitive compared to the outside market. This process requires determining your compensation philosophy, which summarizes the company’s desired position relative to the market, and gathering compensation benchmark data from a trusted independent source to determine pay rates based on various factors, including job description, industry, geographic location, employee experience, and exempt or nonexempt status.
  3. Align incentives to drive the behaviors that matter. For instance, you may offer short-term incentives like bonuses and recognition awards to motivate top performers and long-term incentives like stock grants to encourage employee loyalty.
  4. Give employees choices in benefits instead of adopting a “one-size-fits-all” approach—without sacrificing quality or breaking your budget. Small and midsized companies that partner with a full-service HR solutions firm often have the advantage of group buying power, resulting in lower costs. They also can add low to no expense benefits through these providers that provide real value, like financial wellness or employee assistance programs.
  5. Educate managers on the total rewards program. As noted by WorldatWork, managers need training on total rewards and need help to effectively shape employees’ view of rewards. Training can be simplified with an HR platform that facilitates easy learning of the program and quick access to employee compensation and benefits data.
  6. Communicate the total rewards program to employees. Communication supports Step 5 as Total Rewards Statements are a key way for managers to convey the value of the program to employees.

Constructing a competitive and viable program takes work, but in the end your total rewards program should be viewed as holistic and a core part of the organization’s strategy for success. With employees today seeking the total package—compensation, benefits, and work-life programs that meet their unique needs — a total rewards strategy that speaks to these needs is crucial to securing top talent and a strong market position.

Double-cheese bacon sausage pepperoni gluten free pizza anyone?

 

Date

September 14, 2017

Author

AXIOS HR

Category

Article Business Owners Under 50 Employees Competitive

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