When was the last time you reviewed your total rewards philosophy? Or does your company belong to the 39% of companies without a formal, written philosophy, identified in World at Work/Aon Hewitt’s report (August 2016)?
The total rewards philosophy outlines the organisation’s intent of what and how to reward its employees – the total package. It drives and rewards the behaviours and competencies required to achieve the organisation’s goals, creates a framework for rewards decisions and provides corporate governance.
You can benefit from a well-defined philosophy in several ways. It supports the attraction of qualified talent, motivates your employees to behave and achieve the highest performance levels and retains employees as they move throughout their career life cycle.
To define your new or redefine your existing total rewards philosophy, start with these steps:
- Work with your leadership team to understand the organisation’s strategy, key objectives and company culture (including desired behaviours and competencies)
- Create and align the total rewards philosophy to best serve these interests
- Ensure the total rewards philosophy is also aligned to other HR strategies (e.g. talent management) and doesn’t contradict the organisation’s EVP
- Determine the desired competitive position (e.g. the percentile) within the chosen competitor set, considering also any financial constraints
- Create the optimal rewards mix for each employee group and possibly differentiated by job category
- Layout how each element will be earned (e.g. performance driven, individual vs group incentives).
Creating the unique rewards mix for your company can be one of the hardest steps. World at Work has developed a total rewards inventory outlining the various cash and non-cash rewards companies may offer. You can use this inventory as a starting point to select the appropriate elements for each employee group:
- Compensation: The base/basic salary, premium and variable pay for the services rendered by the employee
- Benefits: The non-cash rewards provided to the employee in addition to their compensation although with a financial value and cost for the company
- Work-life effectiveness: The policies and programmes designed to help the employee achieve balance between work and (home) life
- Recognition: The acknowledgment of the unique contributions, display of the desired behaviours or the value of expertise and experience of an employee or a team, contributing to the company’s success
- Performance management: The continuous process ensuring the employee’s performance contributes positively to the business objectives and success
- Talent development: The opportunities and tools for employees to advance their skills and competencies in both their short- and long-term careers.
While you are creating or updating your total rewards philosophy, use this checklist from the Society for Human Resource Management (SHRM) to ensure a high-quality and effective total rewards philosophy:
- Is the overall total rewards philosophy equitable?
- Are the programs included in the philosophy and policy legally compliant?
- Is the overall philosophy defensible and perceived by employees as fair?
- Is the overall philosophy fiscally sensitive?
- Are the programmes and initiatives fair, competitive and in line with the TR philosophy and policies?
- Can the organisation effectively communicate the philosophy, policy, programmes and initiatives to all employees?
Learn how you can successfully communicate your total rewards philosophy to your employees in our December newsletter.
Are you ready to formalise your total rewards strategy or to redefine your existing one but don’t know where to start? Call us on +971-50-5516322 and find out how we can create, enhance and implement a total rewards strategy fit for your organisation.