Leaders across all sectors (Government, Business and Union) and workers, spend a lot of time talking about percentages and making the salary structure competitive, and with good reason. Compensation is key to employee retention.
If one firm in your industry is offering a 15% pay increase to their staff, then your employees in your organisation are going to feel sorely tempted to seek employment there.
Percentage increase and competitive salaries are an even greater concern right now. People everywhere feel unsettled after the pandemic, and many workers are thinking about a job change, career change and you are even hearing talk about migration. Yet, most employers need to think about business sustainability, which means that they are not in a position to offer everyone an enormous raise (percentage increase).
Fortunately, compensation is not just about salary and it is time to shift the narrative. Employers offer value that goes beyond a monthly paycheque, and these benefits are collectively known as the Total Rewards package. But what do you understand that to mean? Total rewards is the sum total of all tangible and intangible benefits available to each employee. Salary and benefits are the two main components of a total rewards package, as well as things such as training, development, recognition, child care solutions, group life and health insurance, employee assistance programmes, gym facilities, health and wellness programmes and flexibility.
You can place an objective dollar amount on some of these rewards.
For example, health insurance is clearly priced. So is childcare solutions, which employees can save money on if they have a flexible working schedule or if their employer provide after school centres or day care facilities.
Others might be a little harder to evaluate. If you give an employee a chance to gain on-the-job experience, to work on committees, to attend conferences and you acknowledge their hard work, you are in fact increasing their chances of earning a promotion someday, which will eventually mean a higher salary.
While it may be hard for many to estimate the value of these rewards today, they will undoubtedly have a material benefit in the future. And some consideration must be given to that when we talk about compensation.
Total rewards in human resource management is an approach to assessing the value of all of these rewards.
By looking at the value of all available rewards, you can give employees a clear idea of their compensation.
It is not just the basic salary nor a percentage increase.
There are five main components of a total rewards package for employees that everyone should be aware of: (1) Compensation / Salary: This includes base salary, commission, incentive pay, bonuses, and options.
(2) Benefits: employees should pay close attention to the core benefits package such as health insurance, paid time off, wellness programs, and retirement / gratuity plans.
Some companies also offer relevant benefits such as legal support, employee assistance programs (EAP), competitive loan rates, car loans, education loans computer loans at below the market interest rates. (3) Work-life flexibility: Some employees had access to flexible working arrangements pre-pandemic. The pandemic forced many other employers to become more flexible, which happened in the form of widespread remote working and flexible weekly schedules. Flexibility has tangible benefits, like making it easier to manage childcare and education. Also, research has shown that most workers say that flexibility is beneficial to their overall well-being. (4) Development: Financial support for education and certification is a tangible benefit with a precise dollar value.
Employees can also benefit from other total rewards components like mentoring, job shadowing, job rotation, job enlargement, international assignments and getting to work on challenging projects. (5) Recognition: Incentive bonuses offer a direct benefit to hard-working employees. However, there is also great value in an official “thank you” from senior management. Recognition offers demonstrable proof that the employee can exceed expectations – something that will help them when they seek a promotion in the future.
Although these have always existed in the workplace, they have often been taken for granted and managed in isolation. Not only that, when conversations about compensation begin, these elements of the total package are often left out of the narrative.
Under a total reward approach, all aspects of the work experience should be recognised, and prominence must be given not only to remuneration but also to non-financial rewards. This is important since experience shows that employees place great emphasis on intangible rewards when deciding where to work and the level of commitment to give to their job. Therefore it should not be forgotten in the compensation narrative.
We can agree that the private sector employers have tended to be at the forefront of the formal development and adoption of total reward policies.
Some public sector and quasi-public sector organisations have shown some interest in the approach and made significant gains as a result.
What is required is a holistic review of total by all interest groups.
It is important for the employer to better communicate with its employee their total rewards value proposition. It is also recognised that many employees are unaware of the substantial costs to the employer of benefits, even as basic as pensions. To overcome this, employees can be provided with total reward statements, which emphasizes the value not only of pay but also the wider benefits package and potentially other congenial aspects of employment. This will go a long way towards shifting the conversation from percentage increases to Total Rewards.