COMPENSATION STATEMENT

Transcription

1 FROM A TOTAL COMPENSATION STATEMENT TO A TOTAL REWARDS SYSTEM

2 Introduction Many organizations still rely upon printed total compensation statements to communicate the value of employment to their associates. What they could be doing instead, however, is using a total rewards system to express a more comprehensive, all-encompassing representation of the employer value proposition. Using total compensation or employee benefits statements alone is limiting in the fact that these approaches only describe a few aspects of value. Total rewards systems, on the other hand, incorporate all aspects of employment, including less tangible (yet still significantly valuable) elements. An agile and configurable total rewards system has the ability to drive employee engagement, retain top performers, and attract new talent. In this guide, we ll discuss these and other benefits of a total rewards system in greater detail, and explain how you can make the transition in your own company. Here are the main topics we ll cover: Understanding the Key Differences between Total Compensation and Total Rewards Making a Case for Total Rewards Total Rewards Statements vs. Total Rewards Systems: What They Achieve Considerations for Implementing a Total Rewards System Making It Work Long-Term We ll start first by providing an overview of how total rewards systems differ from total compensation. Page 2

3 Total Compensation vs. Total Rewards You may already have a pretty firm understanding of how total rewards systems differ from total compensation, but as the two terms are sometimes confused, we ll take a brief moment to discuss the key differences between the two. Total Compensation As previously mentioned, many organizations use total compensation to communicate the value of employment to their associates. The problem with using total compensation alone is that it doesn t communicate the fullest possible value of compensation, because it typically only covers: Base Pay Bonuses Equity While total compensation may vary from one company to the next, these are typically the core components that most organizations choose to focus on. Total Rewards Total rewards consist of everything that total compensation covers (base pay, bonuses, and equity), as well as much more. Your total rewards program can encompass medical, dental, vision, and other health-related benefits, as well as any other employee perks you may offer. Your total rewards program can also factor in retirement and/or 401(k) plans, legally-mandated programs such as long and short term disability, vacation, and travel and expense compensation. Additionally, total rewards programs can incorporate your company policies. Ultimately, total rewards systems create a comprehensive valuation of all employee benefits and perks, thereby associating an actual number with all of the many benefits your company provides. It helps quantify items such as commuter benefits, time off, and other programs/policies that are typically less tangible. By communicating this information, you create better engagement with employees through honesty and consistency. Speaking of consistency: total rewards systems take a more consistent approach than total compensation. Whereas total compensation is typically an annual event that tells the employee what they ve already made, total rewards systems facilitate an ongoing approach by encouraging team members to access benefits-related information at Page 3

4 any time. As a result, they begin to view their value proposition as reaching far into the future, instead of only a certain point in time. You could even go as far as to replace your offer letters with a link to your total rewards system for prospective employees. That allows them to get a more thorough overview of everything that employment with your company will offer. In many cases, organizations only begin thinking about communicating total rewards after an associate is hired, but taking this proactive approach could make your organization a more attractive option than your competitors. Page 4

5 Making the Case for Total Rewards By now, you may be starting to see the many advantages of implementing a total rewards strategy in your organization. Here are a few additional considerations to keep in mind: It Can be as Detailed as You d Like When communicating total rewards, you can break out base pay, bonuses, equity, medical, and retirement to illustrate how much your company contributes. For instance, if employees are only responsible for 10% of medical because the employer picks up the other 90%, that may be something that you want to highlight to exemplify the significant contributions the company makes for each associate. Yet, you don t have to get super technical and bog your communications down with too many facts. Communicating broader concepts and keeping it simple will make it more accessible for everyone. You Can Connect With Families If you choose to use a portal through which employees can log in anywhere, their families can also become a part of the process of learning about total rewards. This will generate greater appreciation not only from your employees, but from their families as well. It s Critical for Attracting Top Talent You already know that your industry s top talent could be considering at least a couple of different offers when seeking employment. Attracting prospects with a broader value proposition, versus a compensation package alone, will help your prospects of being their top choice of employers, and keeping them on board once they ve been hired. Page 5

6 Total Rewards Statements: What They Achieve A total rewards statement is typically presented annually to employees. It provides a comprehensive valuation of compensation, benefits, and any additional perks. Ultimately, it s up to you to decide whether you want to offer total rewards statements alone, use them in conjunction with a portal through which employees can access benefits-related information, or skip them altogether and use just a portal instead. Here are a few things to think about when making your decision. What Total Rewards Statements Achieve: Increased Employee Engagement Fewer Voluntary Quits Increased Retention Can Engage Employees Families (to an extent) Many companies have success using total rewards statements. Certainly, presenting employee benefits statements is a better choice than giving employees nothing at all. With that said, there are a few drawbacks to consider: It Can Create a Burden on HR: The annual preparation for employee benefits statements can increase support costs for HR, and they can also take months to prepare. They re Costly: Employee benefits statements, when presented annually, can be costly to prepare and may even wind up costing an organization upwards of $100K. They re Not Future-Focused: Employee benefits statements relay information that already happened; thus, they re technically outdated before they re even delivered. Page 6

7 Advantages of Total Rewards Systems Unlike employee benefit statements, total reward systems are not just a once-yearly event. Instead, they take a continuous approach. Thus, they achieve the same advantages of statements: Increased Employee Engagement Fewer Voluntary Quits Increased Retention Engage Employees Families but with many more benefits as well. As mentioned earlier, a total rewards system has the ability to better engage employees family members, who may be interested in learning more about benefits and taking advantage of the ones that are extended to them. Additionally, here are some of the other advantages that total rewards system have over using statements alone: One Time HR Project: Instead of spending months preparing for statements every single year, your HR team will only have to prepare for the roll-out of your total rewards system one time. From there, staff members can make updates as needed, but it s a matter of simply configuring certain elements not redesigning an entire system. The result is that HR will have significantly more time to focus on other priorities. Less Expensive: Because a system only requires legwork from HR upfront, it quickly becomes much less expensive than total rewards statements, which require a great deal of work every single year. Updated Regularly: Making changes is simple with a configurable total rewards solution, and the information presented is timely and relevant, instead of outdated. Access to Powerful Analytics: Should you wish to, you can even incorporate predictive analytics for your employees, such as walkaway value, prospective 401(k) growth, and estimations of what their total rewards package could look like in three to four years. This will get your employees thinking about the long-term prospects of working for your company, which is ideal for driving retention. Page 7

8 Considerations for Implementing a Total Rewards Systems Clearly, introducing a total rewards system to your company could have significant advantages. Yet, there a few factors that are important to consider before taking the leap. We ll review some of the most significant concerns, below. Company Size Naturally, introducing a total rewards system in a small to mid-size company will require fewer logistics than doing so in a large-scale organization. Global vs. Domestic Because there are many variables to consider in total rewards, such as the specific perks that may vary by location, it could become challenging to roll out a total rewards program for a company operating on a global scale. With that said, it s not impossible. It may simply require some fine-tuning and strategic planning. You may also have to consider language differentiation as well, if needed. Content Choosing what to include in your total rewards system is also important. You can make it as broad or detailed as you d like, but most importantly, you should make information available that employees want to see most. For instance, if many of your associates may be taking graduate classes, they may be interested in seeing tuition reimbursement factored into their total rewards. Or, they may prefer to see options for paying off student loans. There are virtually limitless options in terms of what you can include in your total rewards system. Features What features do you absolutely need in your total rewards system or statement? It s helpful to have a concrete idea of your needs before seeking a vendor. Audience Differentiation Will you make the total rewards system available to all of your associates, or only some? Should there be certain elements that only specific employees can access? Consider how you ll present which information to your audience, and how you ll need to differentiate what s presented to whom. Teams/Resources Leading up to the time of your total rewards system roll-out, you ll want to ensure that HR, communications, and marketing are all maintaining a tight relationship. Your communications team can help you craft engaging content, and your marketing team can assist in terms of branding. HR Software Vendors Choose a vendor that offers a solution which best matches up with your needs. Consider viewing demos of their products and learning as much as you can to help inform your decision. Page 8

9 Making It Work Long-Term Rolling out the total rewards system will require the brunt of the work in the beginning, but making it work for your organization in the long run depends on three important factors: 1. Starting With a Purpose Total rewards systems provide many advantages, but narrowing your focus on one or two key outcomes from the get go will give you and the rest of the team members involved a clear direction. For instance, your main goal might be to attract new talent. Or, it could be to reduce turnover. Oftentimes, the purpose that companies choose intends to solve their biggest pain point. 2. Frequency Total rewards systems are preferable to offering benefits statements alone because they aren t outdated, and instead take an ongoing approach to rewards communications. With that said, to ease yourself into a total rewards system, you may want to focus on making updates only quarterly, and then increase frequency from there. 3. Connecting to Core Values Offering a total rewards system to employees organically enhances transparency. It can also act as a means of upholding any other core values your company may have, because you can use strategic branding to incorporate them. Page 9

10 Conclusion Overall, it s clear that total rewards presents a better value proposition than total compensation alone. There are many advantages to total rewards, which we ve discussed in detail here. To review quickly, here are a few of the key concepts: Total Compensation vs. Total Rewards: While total compensation only focuses on base pay, bonuses, and equity, total rewards also encompasses benefits, perks, and company policies for a complete value proposition. The Benefits of Total Rewards: Total rewards systems can be as broad or detailed as you d like them to be, and they create a stronger connection with employees families. They are also better for attracting top talent. Total Rewards Statements vs. Total Rewards Systems: Whereas statements are an annual event, systems are continuous and always available to the employee. They reduce HR support costs, drive engagement, and make it even easier for families to access benefits-related information. Considerations: When choosing to implement a total rewards system, be sure to think about your company size, audience differentiation, content, features, and vendors. Making It Work Long-Term: For the best results, start slowly with a total rewards system and then progress to more frequent updates as your associates become familiar with it. Have a clear objective in mind from the start, and consider how you can inject company values into your system as well. Ultimately, implementing a total rewards system is an employer s best option for maximizing employee value propositions, and it offers many additional long-term advantages as well, such as a more engaged workforce, better retention, and lower support costs. Page 10

11 Resources HRsoft is the trusted global leader in compensation management software whose COMPview solution is proven to control and simplify the full process and allocation of merit, bonus and equity awards to drive manager and employee engagement. Phone: Web: hrsoft.com About the Author Christopher Ford Senior Director of HR Operations, Riverbed Technology Christopher is the Senior Director of HR Operations at Riverbed Technology. Christopher has over 20 years of technology experience in the Silicon Valley as both an HR leader and entrepreneur working with companies such as Cisco, Maxim Integrated Products and Ascend Communications. Connect on LinkedIn Page 11