Outlines the main characteristics of strategic & total reward, và looks at designing & implementing a reward strategy across the organisation
Strategic reward takes a long-term approach to lớn how an organisation’s reward policies and practices can balance và tư vấn the needs of both the organisation & its employees. The concept of "total" reward covers all aspects of work that people value, both tangible and intangible, và may size part of an overall reward strategy.
This factsheet explores the various aspects of designing and developing a reward strategy, from rationale lớn implementation & gives guidance on the principles lớn consider. It introduces the various characteristics of total reward (including the elements they may include), before looking at the approaches available, & the advantages và drawbacks of total reward.
Strategic reward is based on the thiết kế & implementation of reward policies và practices that support và advance both the organisation’s business and people objectives and employee aspirations.
Total reward covers all aspects of work that are valued by people, including elements such as development opportunities, being rewarded fairly and flexible working, in addition to the pay và benefits package. Total reward has implications for cultural change as it can focus in part on employee empowerment.
Links between strategic và total reward
Total reward may form part of a strategic approach khổng lồ reward for many employers. For example, an organisation might adopt a total reward approach, providing cutting edge learning programmes together with flexible working options, as well as more traditional aspects of pay and benefits, to lớn recruit, retain và engage the staff it needs lớn secure its business objectives.
The ability lớn thiết kế và implement a reward strategy và a total reward approach is an important aspect of a people professional’s role and it forms part of our Profession Map.
Our 2021 Reward management survey explores the impact that COVID-19 has been having on pay và benefits. It finds limited change khổng lồ how pay & benefits are managed, with most changes that have sầu been made being temporary. There has been more of an impact on pay increase decisions, with salary rises in 2020 being delayed or frozen, while those in 2021 are being targeted at specific employee groups rather than covering all staff as was the case in 20đôi mươi.
There’s more on what employers should be doing in our Responding to the coronavirut hub.
Developing a reward strategy
Deploying strategic reward approaches often involves web4_setting out a formal, written reward strategy, although it’s also possible to adopt a strategic approach without the use of such a document.
Content of reward strategies
In his Handbook of reward management practice, Michael Armsvào has observed that ‘reward strategies are diverse and so is the structure used by different organisations to lớn define và present them’. However, he’s identified four elements typically included in strategies:a statement of proposed reward developmentsa rationale web4_setting out the business case for the reward proposalsa definition of guiding principlesan implementation plan.
While varying approaches to strategic pay exist, examples of the type of principles to consider include:
Designing pay structures & pay progression arrangements that ensure that the values, behaviours, performances và attitudes that the business needs to lớn be successful are rewarded and recognised (for example, linking individual pay progression with those types of performance that are valued by the business such as customer focus).
Positioning variable earnings carefully against basic pay to lớn encourage appropriate employee performances (for instance, using cash bonuses khổng lồ drive higher sales levels while also taking account of corporate governance standards, risk and opportunity management & brvà trust).
Developing a pay policy that"s competitive sầu with the external labour market in order khổng lồ recruit và retain key personnel needed lớn achieve business success (for instance, paying certain high-performing staff at the upper quartile level when compared with the external labour market) while also taking into lớn tài khoản internal market relativities.
Ensuring both ‘vertical’ integration of employee reward approaches with business goals (such as developing performance-related pay arrangements to help increase revenues) as well as ‘horizontal’ integration of reward policy with wider HR policies (for example, ensuring that pay progression arrangements are aligned with an organisation’s culture, purpose và mission as well as external factors, such as regulation).
For more on how reward strategies can be supported, see our factsheet on pay structures.
Putting strategic reward inkhổng lồ practice
Although strategic reward – at its simplest, using reward policy to support long-term sustainable business goals – is often taken for granted as desirable, some commentators have sầu highlighted difficulties in translating the theory inkhổng lồ organisational practice. One view concludes that attempts khổng lồ use strategic pay systems are especially problematic for ‘a frustrated và often much maligned pay function & long-suffering line management’ and that employers might be better-served taking a risk management, rather than a strategic, approach khổng lồ reward.
However, the adoption of strategic & risk-based approaches to reward aren"t necessarily mutually exclusive sầu.
By recognising that pay isn’t the sole motivator & acknowledging the importance of not only tangible và intangible rewards within the wider context of the work experience, total reward has wide-reaching workplace implications.
As a concept, total reward is not new. As with many management trends, the development originally came from the USA (where the mô tả tìm kiếm ‘total rewards’ is generally used).
What is included in total reward?
The US organisation WorldatWork has identified six separate components of the work experience in addition khổng lồ pay and benefits:Performance và recognition.Work/life balance.Organisational culture.Employee development & career opportunities.Business strategy.Human resource strategy.
Although these components have always existed in the workplace, they’ve sầu often been taken for granted & managed in isolation. Under a total reward approach, all aspects of the work experience are recognised, & prominence is given not only khổng lồ remuneration but also khổng lồ non-financial rewards. This is important since experience shows that employees place great emphasis on intangible rewards when deciding where khổng lồ work & the màn chơi of commitment lớn give sầu to their job.
Total reward may include some, or all, of the following elements as well as traditional elements of pay và benefits packages:Flexible benefits.Access khổng lồ professional và career development.Meaningful work.Freedom & autonomy.Opportunity for personal growth.Being treated fairly.Recognition of achievements.Transparency in reward processes và outcomes.Able to lớn raise matters of concern.Involvement in decisions that affect the way work is done.Flexible working options, including homeworking.Supportive sầu line managers.
The term total reward can also be used in a more limited way simply to refer khổng lồ the financial value of the pay and benefits package rather than the value of the total package of financial and non-financial rewards.
An analysis of various total reward models by Thompson in Total reward, a 2002 gocnhintangphat.com Executive briefing, found that they can be characterised by an approach that is:
Holistic: it focuses on how employers attract, retain & engage people to contribute lớn organisational success using a phối of cash and non-financial rewards.
Best fit: it adopts a contingency approach – total reward programmes need to lớn be tailored to lớn the organisation"s own culture, structure, work process và business objectives.
Integrative: it delivers innovative sầu rewards that are integrated with other people management policies và practices, such as performance management.
Strategic: it aligns all aspects of reward to lớn business strategy – total reward is driven by business needs & rewards the business activities, employee behaviour & values that support strategic goals and objectives.
People-centred: it recognises that people are a key source of sustainable competitive sầu advantage và begins by focusing on what they value in the total work environment.
Customised: it identifies a flexible mix of rewards that offers choice and is better designed to lớn meet employees" needs, their lifestyle và career stage.
Distinctive: it uses a complex và diverse mix of rewards to lớn create a powerful and chất lượng employer br& that serves to differentiate the organisation from its rivals.
Evolutionary: it"s a long-term approach based on incremental rather than on radical change.
While private sector employers have tended to be at the forefront of the formal development và adoption of total reward policies, there has been interest in the approach ahy vọng public sector organisations.
To take one example of heightened interest in total reward in the public sector, there has in recent years been a focus on the non-basic pay advantages of working in the sector, such as high-unique pensions & work-life balance provisions, amuốn the public sector pay Review bodies (which recommend pay rises for several groups of public sector workers such as medical staff, teachers and defence staff).
These can include:Helping lớn attract, retain and motivate employees.Meeting both employee needs và organisation priorities.Enhancing the reputation of an organisation as an employer of choice through its capacity to place a value on the wider non-financial benefits of working for an organisation.Helping the employer better communicate its employee value proposition. Many employees are unaware of the costs to the employer of benefits, such as pensions, which can be very substantial. To overcome this, employers frequently provide individual employees with total reward statements that emphasise the value not only of basic pay but also the wider benefits package & potentially other congenial aspects of employment
Retìm kiếm from our Reward management surveys indicates that employers believe they’re better at integrating financial aspects (pay và benefits) into a total reward approach than the non-financial aspects. An area of concern revealed by the research is line manager behaviour, with employers expressing concern at how well they’ve integrated the behaviour of these staff within a total reward approach. Yet, if line managers don’t support the organisation’s commitment khổng lồ total reward (for example, over family-friendly working patterns) the approach is likely to lớn fail.
Other potential challenges include:
Some rewards are easier to provide than others. For example, most employees might prefer a desk located by a window, but office accommodation is a finite và not particularly flexible resource. In such cases, it would often be very difficult khổng lồ meet everyone’s needs.
Attempting khổng lồ measure or weigh the value of certain reward against one another – particularly if the aim is to include a numerical or tangible value in total reward statements distributed lớn employees. Employees can be confused by too much reward information và choice.
The need lớn educate staff by communicating the value of the reward package and what the strategy aims to achieve sầu.
The danger that the organisation defines the total reward offering with no regard khổng lồ the needs & wants of its staff.
The temptation for employers lớn shift the reward phối from pay khổng lồ lower-cost benefits and non-financial rewards.
Cynicism aao ước some employees that total reward is no more than camouflage for a cost-cutting strategy.
Furthermore, our book Reward management: alternatives, consequences and contexts notes that there"s been a laông xã of evidence lớn suggest that this approach improves employee engagement, productivity or wellbeing. The authors flag that this may be about khổng lồ change though, citing research looking at the positive impact it can have in recruitment.
Reward & Employee Benefits Association
IBEA: The International European Benefits Association
Books và reports
ARMSTRONG, M. (2019) Armstrong"s handbook of reward management practice: improving performance through reward. 6th ed. London: Kogan Page.
PERKINS, S.J. & WHITE, G. (2020) Reward management: alternatives, consequences and contexts. 4th ed. London: Chartered Institute of Personnel and Development.
ROSE, M. (2018) Reward management: a practical introduction. 2nd ed. HR Fundamentals. London: gocnhintangphat.com và Kogan Page.
Visit the gocnhintangphat.com và Kogan Page Bookshop to lớn see all our priced publications currently in print.
BROWN, D. (2014) The future of reward management: from total reward strategies to smart rewards. Compensation and Benefits Review. Vol 46, No 3, May/June. pp147-151.
CHURCHILL, F. (2020) More than half of reward strategies not fit for remote workforces, survey suggests. People Management (online). 19 November.
DAY, N. (2019) How well do pay & nonfinancial rewards attract applicants lớn jobs? World at Work Journal. Vol 28, 1st quarter. Reviewed in In a Nutshell, issue 85.
FARRAND, L. (2016) Put the scores up on the board: a total reward strategy will enable employees lớn see the full value of their package. Employee Benefits. May. pp18-19.
KUCZMARSKI, S. và KUCZMARSKI, T. (2019) How rewards fuel or fail innovation. Strategic HR Review. Vol 18, No 1. pp8-12.
WHITEHOUSE, E. (2020) How will reward strategies change after Covid? People Management (online). 4 June.
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Members and People Management subscribers can see articles on the People Management website.
Charles Cotton: Senior Performance và Reward Adviser
Charles directs the gocnhintangphat.com"s performance và reward research agendomain authority. He has recently led research into: how employers can help improve their employees’ understanding of their personal finances; how front line managers make & communicate reward decisions lớn their employees; how employers manage the risks around reward; how private sector employers can build the business case for workplace pensions; how employees size their attitudes to pay; and how the annual pay review process can become more strategic.
He is also responsible for the gocnhintangphat.com’s public policy reward work & has given evidence to select committees on banking pay, redundancy awards as well as responding to lớn various consultations, such as on pensions, retirement and MPs’ expenses.