Total Rewards Statement: 8 Steps To Get Started
With rising talent shortages, the war to attract, engage and retain talent is at an all-time high. Employers need to show candidates and employees what they are offering in a tangible way. A Total Rewards Statement can help with that. Let’s dive into all you need to know about Total Reward Statements and how to put them to practice!
Contents
What is a Total Rewards Statement?
Why Total Rewards Statements have become an important differentiating factor in talent decisions
What are the key components of a Total Reward Statement?
A Total Rewards Statement example
Steps to implement a Total Reward Statement
What is a Total Rewards Statement?
A Total Rewards Statement (TRS) is a personalized document that provides a view of the overall value the organization offers to the employee as part of the relationship. In simple terms, it provides a quantified overview of the true value of the employment relationship as part of the organization’s Total Rewards strategy.
A TRS aims to be as comprehensive as possible. Very mature organizations also include access to specific employee offerings such as employee wellness programs, learning opportunities, and other employee services as part of their TRS. The Total Rewards Statement is created through the collaboration of various role players, but usually, it’s owned by the Compensation and Benefits team within HR.
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Practically, Total Rewards Statements can be used effectively as part of the negotiation process with new talent and internally to serve as a way for employees to become aware of the value offered by the organization. This, in turn, contributes to employee engagement and retention.
A TRS is also one of the most effective ways to communicate the holistic employee value proposition. Usually, a Total Rewards Statement, if done well, has a high level of employee interest and adoption.
The reality is that most employees do not have a good grasp of the benefits offered to them. Often, HR efforts to create awareness on aspects such as employee benefits fail due to a lack of foundational understanding of rewards. A study found that 40% of employees don’t understand their total rewards, 38% don’t even understand the basics of their payslips, and less than half of employees have had their payslips explained to them. That’s where a Total Rewards Statement adds value.
Why Total Rewards Statements have become an important differentiating factor in talent decisions
In the past year, 63% of people quit their jobs due to the perception of low pay. With rising talent shortages, the war to attract, engage and retain talent is at an all-time high.
According to a recent survey, 54% of companies are reporting a talent shortage in the US, the highest number in more than a decade. Other parts of the world, such as Europe, are in a similar position, with talent in specific critical skill areas becoming hard to source and even harder to retain. Gartner predicts that we will see a 20% increase in annual employee turnover as compared to pre-Covid numbers.
Total Rewards Statements can be leveraged in three ways to contribute toward talent efforts and considerations:
Becoming an employer of choice
The competition for talent, especially critical skills, has become a race between employers trying to position themselves as an employer of choice and, importantly, as an organization with a unique selling proposition to their employees. Candidates and employees compare employee value propositions, and they are providing feedback on public platforms such as Glassdoor and LinkedIn on company offerings and their experiences of the employment relationship.
Total Rewards Statements are becoming more commonly used and will become a key part of talent attraction and employer branding. Organizations that struggle to articulate their value offering run the risk of not being able to compete for talent in a highly constrained market. They also lose internal talent as employees perceive others to provide better reward options. Whether this is true or not is not the main issue; it’s how well you manage this perception and create real insight into what you offer as an employer.
Total Reward Statements help the organization articulate how they are bringing the employer brand to life in an authentic and tangible manner.
Showcasing the value of the employment relationship through total rewards
Even though Total Rewards Statements have been gaining popularity for several years now, recent events regarding the Great Resignation have highlighted the importance of helping employees understand the value gained from the employment relationship.
TRS is an effective tool to help employees understand the holistic value of working for the organization. It influences employees’ perceptions of what their organization offers.
Let’s make this practical.
John works for a manufacturing organization and earns $55,000 per year. His friend, Sandra, works at a competitor and earns $65,000 a year. Upon first glance, it seems that Sandra is better off. Yet, when considering that John’s organization also provides subsidized medical insurance, a healthy pension fund contribution, subsidized meals, and flexible working options, the perception of value starts to change.
To help John understand the true value of the employment relationship, a TRS paints a more holistic picture than traditional payslips or benefit statements. It includes a broader perspective of reward that highlights elements of the employee experience.
In our video series HR Dialogues, we talked to Professor Xavier Baeten from Vlerick Business School and discussed how organizations could rethink total rewards and transparency in remuneration. See the full conversation below:
Helping employees become aware of personalization options
Personalization of rewards has become more critical over the past few years with the rise of the employee experience movement. The ability to provide choice to employees to tailor the value proposition to their circumstances has sparked a lot of debate within the reward community. On the one hand, personalization makes sense and creates value for employees. However, others believe that personalization will bring about challenges regarding pay equity.
Regardless of your organization’s perspective, a Total Rewards Statement provides an opportunity for employees to have a choice within some of the more traditional Reward components. For example, most pension fund contributions can be flexed up or down, medical insurance has various options available, and salary composition can be tailored to include 13th cheque savings.
A TRS makes employees aware of the choices already available within their Total Rewards packages and creates a sense of personalization.
What are the key components of a Total Reward Statement?
You should view your Total Rewards Statement as a product brochure that is utilized to sell the value you offer as an employer to prospective and current employees. The key components of a TRS can be divided into four categories:
- Financial rewards: Elements that translate into actual monetary value, e.g., salaries
- Monetary benefits: Elements that are quantifiable and paid on behalf of the employee to other providers, e.g., medical insurance
- Non-financial rewards: These include quantifiable benefits that are not paid in cash, e.g., learning budget
- Intangible rewards: This category includes other value proposition elements that are difficult to quantify, e.g., flexibility, equipment
Organizations might not have all the categories as part of their Total Rewards offering. They need to implement categories that apply to what they offer to employees. A good practice is to compare your end-to-end employee value proposition, including other employee services provided by partners such as facilities or corporate social responsibility, to evaluate all elements represented in the Total Reward Statement.
A Total Rewards Statement example
To make this practical, we will use an example of a Total Rewards Statement utilized by a multinational financial services organization to demonstrate how they utilized these categories to operationalize their TRS.
Section Description Positioning A short description explaining what a TRS is, what employees can expect to see, and reinforces where the TRS fits as part of the broader EVP. This section acts as a confirmation of the value of the employee. It should support the key messaging of the type of employer you aim to be. Financial rewards and monetary benefits This section provides an overview of the financial rewards. In our example, the organization provided:
– Guaranteed remuneration
– Retirement scheme contribution
– Medical insurance
– Total performance bonus
– Performance incentivesShares This section provides an overview of share allocations and options for the employee, if applicable. The purpose of this section is to show long-term value and is often important for retention purposes. Additional information on benefits In our example, this section gives more information on retirement benefits with flexible options the employee could explore.
This specific organization also provided additional risk benefits for employees and depicted these offerings and options here as part of the TRS. These included disability cover, life insurance, and family cover.Leave benefits This section provides an overview of available leave and reinforces the types of leave employees have access to, such as parental leave, study leave, and sick leave. Long service benefits This section showcases long service benefits and when the employee would qualify for these additional benefits. Learning This section outlines learning opportunities available to the employee, specifically focusing on where employees formed part of learning initiatives. For example:
– E-learning licenses
– Learning programs attended
– BursariesEmployee Offerings and Services This section provides an overview of other services available to the employee with links to access these services. These included:
– Gap cover services
– Employee Assistance Programs
– Sports and social clubs
– DaycareLegal T&Cs Lastly, employees must be aware of the TRS’s applicable legal terms and conditions. These include conditions of data integrity and where additional support is available to better understand these benefits.
Steps to implement a Total Reward Statement
When starting with a Total Rewards Statement, the implementation process is just as important as the actual TRS product.
Let’s look at the steps required to implement a TRS effectively.
1. Educating employees on rewards and the purpose of the TRS
TRS will only be effective when accompanied by a robust education campaign to employees and specifically to managers on the basics of rewards.
Be aware that a Total Rewards Statement will spark a lot of interest and questions. Even though this is a good thing, it can lead to discontent if not appropriately managed. It is essential to position the rationale for implementing a TRS and how it fits with other human capital initiatives, specifically related to the employee value proposition and experience.
Depending on the organizational context, education campaign requirements will differ. At a minimum, however, there should be:
- basic communication explaining the TRS and its value,
- an opportunity for employees to ask questions via a Q&A,
- an FAQ document for both managers and employees,
- and a support guide that explains the basics of the statement and terminology.
2. Enabling HR, support employees, and line managers to engage with employee questions
It is good practice to equip your HR business partners, support teams, and line managers with the basic knowledge to help explain the TRS to employees. Try to cover basic terminology, the process of determining rewards, and how the organization approaches the reward cycle.
Inevitably, this process leads to discussions on how your organization determines pay. You need to ensure that you explain that transparently, helping employees to build trust in the process.
This is also an excellent opportunity to create a FAQ document that you can share with others to answer specific questions for first-time users of the Total Rewards Statement.
3. Developing the statement and choosing the right technology
The development of the actual statement will require the collaboration of several role players. Internal communications, Compensation and Benefits, Payroll, People Analytics, and IT will be involved in designing the statement, creating the communication plan and key messages, providing the data, and ensuring that statements can be generated at scale by employees.
Try to develop a few mock-up versions and test them with your employees to see what information is useful to include.
A variety of HR software is available to help you visualize the Total Rewards Statement. Be aware, however, that your core HR data and HRIS should inform your technology choices. Visualization is the easy part of building a TRS; it’s the data accuracy and collecting information that is more challenging.
Always view the TRS from the employee’s perspective and avoid financial jargon and complex terminology. There is more value in viewing the TRS as a marketing document that sells the reward offered to the employee in an understandable and straightforward manner.
Here’s what your one-page total rewards statement template could look like:
4. Validating data and checking quality
One of the biggest challenges is ensuring data integrity and accuracy at scale for the Total Rewards Statement. Try to draw a cross-sectional sample of generated TRSs and evaluate their accuracy and correctness before you launch. This is tedious work but extremely important to ensure the credibility of the TRS.
5. Launching
Once ready, you can launch the TRS and let employees know they can access their statements. Be sure your technology can handle the increased traffic. There have been numerous examples of organizational systems being unable to cope with the entire workforce accessing their TRS on the day of launch. You might need to consider a sequential release to ease the burden on tech and support.
You should also be cognizant of the timing of when you want to launch the TRS within the context of the broader reward cycle. It might be a good idea to align the launch to an event such as bonus payments or allocations. Alternatively, you can commence with some new benefit information available to employees.
6. Measuring the impact
Be sure to include some measures in terms of the impact of the TRS. Operational metrics are important, such as % of employees accessing the statement or the number of errors as well as employee feedback on the impact of the statement.
In the longer term, you should measure the impact of the TRS as part of the evaluation of the employee perception of the employer, either as part of an employee satisfaction survey or engagement initiative.
7. Evolving the statement
Lastly, you can evolve the statement over time to include more reward elements. Several organizations adopt a minimum viable approach and launch their first Total Rewards Statement by only including basic financial information before adding more rewards categories. This approach allows for faster execution and continuously educates employees on how to understand and engage with the TRS.
A final word
The war for talent will be won or lost in the perceptions and lived experiences we create for employees. In the world of employee value propositions and experience, the understanding and experience of reward will become an essential differentiator influencing talent decisions to join or stay.
A Total Rewards Statement is a valuable tool to help create awareness of the true value of the employment relationship and continuously educate employees on the real value of the employment relationship.
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