When it comes to attracting and retaining top talent, employers do their due diligence to incentivize hard-working folks to stay with them. Employee retention is an essential metric for a functioning business; more time and resources spent filling positions results in weakened organizational performance.
To secure employee turnover, employers have to make it clear to their workforce why they are their best option. A total rewards statement is a full-spectrum document that spells out all the reasons an employee should stay with them instead of moving to a competitor.
Let’s examine what a total rewards statement is and why they are so important to your talent management in this comprehensive guide.
What is a total rewards statement?
A total rewards statement is a document that provides employees with a full outline of their compensation, benefits, and other incentives in their contract.
There’s more to an attractive contract than compensation. Sure, competitive pay is a significant appeal to talent. But to keep people invested in the organization for the long term—especially in tight labor markets—organizations have to provide a suite of rewards that are undeniably advantageous.
The total rewards statement fulfills this role by condensing all of an employee’s total rewards into a single, easily digestible format.
Total rewards statements are immensely important for hiring and talent acquisition. A competitive total rewards statement sometimes makes all the difference in whether a new hire takes your offer over a competing one; it definitely makes all the difference in reminding your top people that you’re giving them the best possible offer.
Total rewards statements don’t just get people through onboarding—they keep them on board.
What does a total rewards statement include?
A total rewards statement includes a summary of an employee’s compensation, benefits, and other contract incentives. Total rewards statements often vastly differ from one another because different employees sometimes receive different rewards.
However, if there is any sort of incentive in an employee’s contract, you ought to include it on their total rewards statement. The more rewards you include on their statement, the stronger your case that your offer is the best one for them.
Total rewards statements include several rewards items, including but not limited to:
1. Conventional benefits
Beyond base pay, conventional benefits like health insurance, life insurance, or dental insurance are massively influential rewards. Total rewards statements list these contract staples first and foremost, with as much detail about their quality as possible to solidify their appeal. Be sure to mention if their benefits package is tax-advantaged.
Other conventional compensations include the portion employers pay toward Social Security and Medicare taxes.
2. Voluntary benefits
Voluntary benefits programs include several kinds of additional benefits that make a contract that much more attractive, like disability insurance, financial counseling programs, and other employee assistance programs.
3. Retirement plans
Employers want their best employees to stay with them for the long term. Highlighting their future with competitive retirement plans offered by the organization—like a 401(k) or an IRA—reminds the employee that it’s in their best interest to stick it out with you because you’re taking care of them.
4. Paid time off benefits (PTO)
PTO is a strong benefit for employees. Generous PTO approvals allow employees to reduce stress by comfortably accommodating their vacation time, sick days, bereavement time, parental leave, or other needs for time off. Be clear about how much PTO they have, how much it pays, and extenuating circumstances that might bolster their need for personal time.
5. Pay-for-performance compensation
When your employees have a direct incentive to improve performance, both the organization and the employee reap the results. Underscore pay-for-performance variables in your statement that reward employees for working harder, like bonuses, commission opportunities, and profit-sharing plans.
6. Professional development opportunities
In the same way, employers aim to develop and grow, employees want to develop and grow as well. Let your employees know that you share their goals by featuring professional development opportunities in their total rewards statement, like employer-funded training programs, higher education subsidies, or professional development stipends.
7. Healthy work-life balance
Research indicates your employees want their living to help them live well both inside and outside the office. Make clear your willingness to empower a healthy work-life balance with offerings like flexible hybrid work options, paid sabbaticals, or dynamic scheduling options.
8. Wellness opportunities
Ideally, work doesn’t interfere with an employee’s sense of wellness but strengthens it. Employers often appeal to the workforce by promoting employee wellness through organization-funded offers like gym memberships, wellness programs, and meditation sessions.
9. Culture benefits
Toxic workplaces decimate your employee retention rate. To create stronger bonds in the organizational culture, highlight features in an employee’s total rewards package that create a positive work environment, like an employee recreation room, team-building activities, and parties.
A comprehensive total rewards package lists all these elements and more. The more rewards included, the more effective it is. Attractive total rewards statements translate into tangible benefits for HR managers and the organization as a whole. Here are a few stand-out benefits promoted by total rewards statements.
10. Improve employee morale
Flagging employee morale has a wide impact on an organization, from productivity to retention. Employers boost employee morale by leveraging the positive potential of total rewards statements.
Employee morale plummets if they feel under appreciated and underpaid—these feelings become pervasive if employers don’t take the opportunity to make the benefits of their employment clear.
Total rewards statements are the perfect solution: They provide an objective outline of all the incentives in the employee’s contract. Additionally, statements showcase how much the employee means to the organization by virtue of the benefits provided to them.
11. Increase engagement with the company
Employee engagement refers to an employee’s level of dedication to the organization. Unengaged employees are less likely to give peak performance or stay with the organization for an extended period.
Total rewards statements change that. The value of a total rewards statement is that it showcases the organization’s commitment to the employee; the rewards packages it contains reflect the level of investment they’re willing to make to the employee.
Furthermore, a routine total rewards statement program serves to reiterate the value proposition of an organization to employees while reconnecting with them whenever statements are issued.
12. Attract new talent
Talent on the job hunt looks for the best possible offer. If employers aren’t able to match the expectations of top talent, then they don’t land the most qualified people.
To get the best results from your hiring program, include competitive total rewards statements early and often in the process. When hiring managers identify qualified candidates, the sooner they make a compelling offer, the better.
A total rewards statement is the comprehensive offer employers make to potential new hires; it often makes all the difference in their acceptance or refusal of the position.
13. Educate employees on their benefits
Employees don’t always completely understand their benefits without a total rewards package. The less employees know about their benefits, the less incentivized they are to stay with the organization.
Don’t let disconnects in employee awareness of their benefits hinder your retention rates. Routinely communicating their benefits to the employee through total rewards packages dispels any chance of confusion. By educating them on the full breadth of their benefits, employers ensure that their employees know the advantages of their position.
How to access a total rewards statement
A primary function of total rewards statements is reaffirming available employee benefits. For onboard employees, the values of a total rewards statement are meaningless if they don’t know how to access them. Poor access to information provided by total rewards statements is devastating.
Research from 2021 reported that 63 percent of employees who quit their jobs cited a perception of low pay; another 63 percent quit due to a lack of advancement opportunities. What’s more, 57 percent reported they left because they felt disrespected at work—all grievances that are addressed through a total rewards statement.
Improving access to total rewards statements has a massive impact. So how do employees access their total rewards statement? Organizations try to make the process as easy as possible.
Some compile total rewards statements in an easily accessible online statement, typically mediated by third-party service providers. Other organizations choose conventional methods, like consistent distribution of hard copies. No matter the route to the employee’s total compensation statement, accessibility is the chief feature in your total rewards strategy.
How to create a total rewards statement
Creating a rewards statement requires employers to compile all available information on an employee’s base salary compensation, benefits, and other incentives. A prime resource is the employee contract, where their compensation package (salary, bonus structure, etc.) is outlined. Additionally, the employee contract likely contains information on conventional benefits like healthcare or retirement plans.
Beyond the employee contract, employers employ due diligence to identify rewards that are not as overt. For instance, assess any in-office advantages available to the employee, like recreational areas, and re-examine policies to find opportunities for professional development that might be available to the employee. Include as many rewards as possible to make the most compelling rewards statement possible.
Of course, learning how to make a total rewards statement involves a process that extends further than crafting the statement itself. Be sure to leverage an effective distribution system—online or hard copy—to properly educate the workforce about their benefits with the detailed information total rewards statements provide.
Lastly, consider feedback from the workforce about their perceived quality of the total rewards statement: Is it confusing? Does it miss any perks?
Total rewards statements are documents that exist to educate the workforce and improve the employee experience; their feedback is instrumental to optimizing your statements to their advantage.
When do total rewards statements update?
As employees develop within the organization, they receive better compensation packages, new benefits, or other rewards. Because the suite of rewards available to an employee is likely to change over time, total rewards statements require periodic updates to keep their information accurate.
Human resources might update total rewards on an annual basis; some organizations update them on a semi-annual basis. The more up-to-date total compensation statements are the better educated the workforce is, reducing the risk of turnover increases and strengthening morale.
Dynamic vs. static total rewards statements
Total rewards statements come in two distinctive types: dynamic and static total rewards statements.
Static total rewards statements are defined by their annual distribution. These types of statements provide employees with a complete overview of their benefits, compensation, and other incentives done on their behalf over the year.
Because static total rewards statements are released once a year, they put less strain on HR professionals. However, their annual distribution invites the opportunity for information gaps in the middle of the year and risks alienating the workforce.
Alternatively, there are dynamic total reward statements that are updated frequently, sometimes on a monthly basis. Dynamic statements keep employees informed on the current status of their rewards, promoting more active engagement with the organization.
While informative, the constant upkeep of dynamic total rewards statements is more difficult to manage than their once-a-year counterparts as they require consistent renewal from HR.
Final thoughts
You don’t waste an opportunity to improve your organization’s profit margins, so why waste the opportunity to optimize employee engagement, retention, and morale?
Implementing an effective total rewards statement initiative in your organization accomplishes all these goals and more. Above all, total rewards statements educate your employees about the value of their work and how much the organization appreciates them as a person.
To get the best possible results from your total rewards statements, keep an open dialogue with the workforce; their feedback helps you tailor-make your statements for their benefit.
Worried about your employee’s compensation?
Some managers have a gnawing concern when considering total rewards statements for their employees: What if you’re not paying them enough?
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