A Total Rewards Program

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Table of Contents

How total rewards differs from other more traditional approaches
Advantages and disadvantages from the employer’s perspective
Advantages and disadvantages from the employee’s perspective
How total rewards are affected by today’s legal environment
References

How total rewards differs from other more traditional approaches

A total rewards program is different from conventional methods of compensation and benefits because it acknowledges the importance of other motivators, other than pay, in the work environment. In this school of thought, it is assumed that monetary rewards are important but that non monetary or intangible rewards are also a crucial part of the compensation plan.

Consequently, this method addresses challenges in recruitment and retention by offering an all rounded approach. Additionally, most compensation programs in the past would focus on divergent and uncoordinated benefits and pay packages but these were not integrated into one uniform program.

Total rewards allow organisations to cover all aspects of workplace motivation in reward systems such that ample returns on employees can be realised by organisations. Previous methods of compensation were often standardised; most made it difficult for companies to stand out from the crowd.

Total rewards changes all this by giving employers great flexibility in deciding which incentives, motivators and pay packages to choose for their employees (HR Focus, 2006). The unique combination of these rewards makes every organisation that uses total rewards exceptional and that contributes towards their competitive advantage. Also, traditional methods of compensation were too focused on pay to the detriment of the employer.

In those environments, employers would end up with very high costs. However, in total rewards compensation programs, employers can exercise control over their business expenses because these are spread over a vast portfolio.

Advantages and disadvantages from the employer’s perspective

The total rewards program’s main advantage is that it allows employers the ability to attract the right pool of employees and retain them. Certain drivers in the total rewards program have the ability to bring in the right kind of employees needed to meet company objectives in the future.

Also because there is a dynamic combination of rewards that accommodates employees’ careers, chances are that most will be motivated to remain in their positions and this will increase retention. The method is also quite good for employers because it is linked to business strategies.

Since performance improvement and assessment form an important part of the total rewards system then companies have a chance of aligning their business goals with their human resource practices (Dixon & Heneman, 2001). This is likely to create a very profitable business. Lastly, since the model looks at motivation across all dimensions then chances are that productivity will go up; employees will be more satisfied with their jobs and their work experiences. Once again, this translates into greater profitability for employers.

Employers may suffer in instances where profits are low or during economic recessions. When profit sharing is supposed to form a crucial component of the total rewards program then this can only be realised when the profits exist. Employees can get demoralised when they do not get cheques for long periods of time during economic downturns and this may hurt employers’ goals. Also, employers have to deal with the challenge of unions which may severely restrict the manner in which pay can be manipulated.

Advantages and disadvantages from the employee’s perspective

Employees get to benefit from the total rewards package as well. First, they will get recognised for their efforts as this forms an important part of total rewards. Recognition can be done through cash bonuses, trips, certificates and other incentives. This makes employees feel valuable and fulfilled in their work life.

Additionally, total rewards focuses greatly on career opportunities. In this regard, it gives most employees an opportunity to develop their careers through learning opportunities, mentoring and coaching as well as career advancement opportunities.

Lastly, employees often benefit from this kind of program because they can get a chance to achieve work life balance. In other words, they may be accorded flexible working hours, get paid for time off and may receive monetary or non monetary support for their dependents. This means that their personal needs can be carefully balanced with their professional needs.

However, a total reward program does not come without limitations especially on the part of the employee. He or she may find that the total rewards package in a certain organisation is not suitable to his or her needs. In as much as flexibility is a source of strength in the total rewards compensation program, it can sometimes be a weakness. Sometimes employees may have many dependents and may require payment for time off but this component could be missing from the total rewards package in that employee’s company.

Consequently, the individual will have to make due with a program that is not suitable to his or her needs. Another problem with the total rewards program is it requires performance assessment. Sometimes the performance system maybe well designed and this is okay. However, in other scenarios, it may be hastily crafted thus resulting in an unfair system for employees who may get frustrated (Corby et. al., 2005).

How total rewards are affected by today’s legal environment

As noted earlier, part of the total rewards programs is to offer incentive pay in the form of long term methods such as stock options and shares. Governments often pass legislations on stock options such that limitations on their offerings exist. Even certain regulations on reporting have already been put in place in order to ensure that these are administered well.

Employers must act in accordance with these regulations regardless of whether this could minimise compensations due to employees. The legal environment also regulates retirement plans, pension plans and other related packages. Consequently, employers may be forced to pay more than they can afford in this sector. Alternatively, legislations may disfavour employees if the bar is set too low.

Also, several laws on taxation can increase or decrease the amount of taxes paid by employers depending on the nature of compensations and benefits that they give their employees. Some governments give tax incentives on business expenses and total rewards from part of these expenses (Rynes & Gerhart, 2003).

However, some governments may not recognise particular components of the total rewards system such as recognition awards. These may cost the employer money but may not be legally recognised as business expenses. Additionally, many benefit programs such as social and health insurance are regulated by the government.

This may create an entitlement mentality amongst employees who may not appreciate certain components of the total rewards program. This may undermine the very purpose of creating this reward program; motivating employees. Some legal environments require continuous compensation of workers irrespective of economic downturns and this may be quite challenging for employers.

Several legislations on health insurance can cause excessive baggage on the part of the employer who may find it difficult to give this incentive to all employees. Consequently, some may need to be laid off so as to meet those legal requirements on health or social insurance.

References

Corby, S., Stanworth, C. & White, G. (2005). No news is good news: Evaluating new pay systems. HRM journal, 15, 4-24

Dixon, K. & Heneman, R. (2001). Reward and organisation systems alignment. Compensation and benefits review, November, 17-28

HR Focus (2006). Retention, morale and productivity result from work life programs. HR Focus report, 83(1), S1-S3 Rynes, S. & Gerhart, B. (2003). Compensation: theory, evidence and strategic implications. Thousand Oaks: Sage

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