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How to Build a Total Rewards Program

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    A total rewards program is the combination of pay, benefits and other perks employers give to employees for their work. And without a competitive strategy, businesses could lose the workforce they need to grow or maintain their success. Read these nine steps to build an adaptable and renewable total rewards program.

    Compensation makes or breaks employee relations. After all, it’s a:

    Likewise, it’s often an organization’s largest expense.

    For good reason, too. Compensation directly impacts a company’s financial stability and work culture. Lackluster total rewards strategies can discourage personnel, expose employers to compliance risks and negatively impact a team’s ability to achieve its goals.

    However, with the right total rewards, businesses can boost employee loyalty, productivity and engagement.

    And we’ll help you build it. Keep these in-depth steps in mind as you build your first total rewards program or give your preexisting strategy a total rehaul.

    1. Define objectives and vision

    Defining the goals of a total rewards program is arguably the most important step, despite how often it’s overlooked. By starting the process with intentionality and purpose, organizations create a package that truly supports their goals without getting weighed down by needless options.

    To craft an effective total rewards package, it’s important for leaders to understand what:

    • their company can offer
    • is reasonable, competitive and appropriate
    • current and future employees expect

    For example, if the goal of a program is to keep employees at a slow-growing company around as long as possible, then that may require above-average salaries and good benefits that support families. If a startup is looking to hire entry-level roles quickly, it may choose to offer high sign-on bonuses and enticing career-building opportunities.

    The goals of the company and the compensation program form a foundation strong enough to build upon.

    2. Evaluate current total rewards strategies

    In tandem with defining objectives and a vision, organizations should also assess the quality of their:

    This can involve analyzing key metrics such as employee satisfaction, retention rates and performance outcomes to determine the impact of the current strategies.

    Another important metric to consider is the current use rate of the existing program. If you offer ample PTO but people only take an average of five days off per year, then maybe you should reevaluate your time-off policies. Or say you offer high bonuses to employees who achieve certain metrics, but no one has ever accomplished those. In that case, you may need to adjust the requirements to motivate employees with realistic incentives.

    3. Collect input from team members and leadership

    Obtaining insight from key stakeholders about their teams’ pay is paramount to a cohesive program. In fact, if leaders don’t align with your approach, it could be doomed before it even gets off the ground.

    Strong programs are designed with the entire organization in mind. And that requires policies that diffuse bias and ensure equitable treatment for all employees to foster a culture of inclusivity and fairness.

    Organizational leaders have invaluable knowledge and awareness of the company’s:

    • resources
    • goals
    • objectives
    • projected head count
    • and more

    Gaining their input and buy-in early helps build the total rewards program from a concept to an informed, compelling and, ultimately, effective strategy.

    4. Gather employee feedback

    Since employees are the recipients of a company’s total rewards program, their opinions and values must be considered when a strategy is being constructed. Of course, employee input shouldn’t be the only metric considered, as their requests may need to be tempered by what’s truly feasible.

    Administer surveys to understand what your people expect. This will help you understand how employees feel about these programs and what possibilities could enhance their morale and focus. You could design a survey that asks employees to rank benefits from most desirable to uninteresting.

    Another survey strategy is to ask employees to provide their most desired benefits in an open response. Afterward, you can tally the most popular requests and identify popular answers. However you design your survey, it must be administered in a way that employees can access and complete it thoughtfully.

    5. Align the program with company values and culture

    Think of a total rewards program as a communication between a company and its employees. Aligning an organization’s total rewards program with company values and culture allows employers to live out their vision and build credibility. (It’s like putting your money where your mouth is into practice.)

    For example, employers working in child care may have a core value centered on work-life balance or family values. These employers may choose to give generous parental leave and stipends for day care to reflect what people in the industry value. Or if a leadership team chooses collaboration as a core value, they may structure rewards that celebrate and encourage teamwork.

    Connecting total rewards programs with organizational principles not only motivates employees, but may also strengthen their connection to the team’s mission and vision, further driving retention, performance and positive morale.

    6. Roll out guidelines and benchmarks

    When it comes to total rewards, communication is key. Effective programs are well-documented and supported with:

    • training
    • info sessions
    • clear guidelines
    • a strategic approach

    Communications should be clear, concise and tailored to different stakeholders depending on their needs and values. That way, everyone clearly understands the full package and how to reach different levels of compensation (if applicable). And remember, when programs change, it’s important to express to people why and how any changes may impact recipients.

    Benchmarks or compensation bands are excellent tools for employers to use to organize pay. Every team within an organization is given guidelines for how people within those departments may be compensated according to the program. For example, a sales department may offer a salary plus incentive bonuses for employees who achieve certain levels of productivity. This department may require high pay because salespeople within this company’s industry receive high salaries, and they must stay competitive to retain top talent. A different department within the same company may offer lower salaries without bonuses because that’s what’s expected in the labor market.

    In each case, team leaders are given ranges of acceptable salaries that they may offer their employees based on their skills, experience, levels of education and capabilities. Organizations may design and distribute benchmarks and compensation bands so that the total strategy remains aligned, within budget and commensurate with industry standards.

    7. Monitor progress

    No program exists in a vacuum, and no company stands still. There are myriad influences on employees and teams that must be considered regularly so programs retain their strength and ability to attract, motivate and retain people.

    Imagine a total rewards program created for a tech company in 1990. Even if the salaries and cash compensation were adjusted for inflation, the total rewards and the standard for almost any aspect of an effective program will have changed drastically in the last 34 years. This package could seem bare and incomplete compared with what tech companies offer their teams today. Organizations must stay current and regularly evaluate program strength to make changes where necessary.

    8. Review outcomes

    Reviewing outcomes at a regularly scheduled interval may provide HR teams with the right framework and timing to support their organizations.

    The review process may include analyzing key impact measures such as employee engagement, retention rates and productivity levels. Additionally, comments from leaders and employees may help identify issues before they cascade into negative trends. You can evaluate programs through:

    • follow-up surveys
    • turnover analysis
    • performance reviews
    • benchmarking
    • usage reports

    9. Create an adaptive strategy

    Effective programs must change and adapt to the labor market standards and trends to stay effective. Leadership teams must create a culture of trust and more easily accept shifts.

    Agility also allows employers to make adjustments and stay competitive. Still, they should be cautious of changing too much and making it difficult for employees to understand how they can advance. Regular feedback mechanisms, data analysis and industry benchmarking are great ways to assess program strength and make recommendations for change if and when necessary.

    Designing total rewards programs is a highly individualized process. Every company has unique requirements to optimize organizational strength in return for sound benefits. There is no one-size-fits-all package or even equation that can tell leaders how to design their programs. Packages should be:

    • aligned to corporate values
    • compared against industry standards to remain competitive
    • evaluated regularly to ensure employers are keeping up with constantly evolving landscapes

    With the right total rewards program, higher performance, engagement and success will follow.

    Explore Paycom’s resources to learn more about compensation, HR strategy and more.

    DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.