A total reward strategy can help staff to appreciate the full value of their benefits, but should also include intangibles such as opportunities for learning, says Laverne Hadaway
Few people would dispute that a total reward strategy, designed to show employees the complete value of their package, can promote engagement. However, quantifying the link between the two and identifying which aspects of the strategy are the most effective is much harder.
Tobin Coles, head of flexible benefits at Jelf Group, says employee engagement surveys conducted before and after the launch of a total reward strategy generally show a 10% to 25% improvement in appreciation of the benefits on offer. In other words, total reward strategies do have a significant impact on engagement.
However, Coles chides employers for not doing more to develop and communicate total reward strategies. “We ran a survey of our clients and found that they spend 15% of their payroll on providing benefits, but only 0.1% on telling employees what benefits they have,” he adds.
As a result, he believes many employees change jobs based purely on salary because they do not understand the value of their total benefits package. Coles says some of Jelf Group’s law firm clients had experienced this problem in the past. “Rival firms were approaching employees and offering them an additional £5,000 a year to move. It sounded like a really generous package, but when all the benefits were taken into account, the overall package was usually less than they were getting,” he explains.
However, it is not just the tangible compensation and benefits, such as pay and rewards that engage employees. The intangibles, such as company culture, leadership and opportunities for development are also important and should be included and communicated as part of the total reward strategy. Peter Christie, director of reward at Hay Group, says: “All the research indicates that the more intangible aspects of why people join an organisation and stay are what engage employees.”
Chris Charman, consultant, executive reward at Towers Perrin, agrees and says this is why a total reward strategy should go further than just offering total reward statements. “Get pay and benefits wrong and you can kiss goodbye to employee engagement. A total reward statement helps people understand what they receive, but it’s of limited value for long-term employee engagement. Factors such as culture, leadership, learning and development feature in eight of the top ten things that employees value,” he says.
The personal touch
Charlie Carrick, director at Orbit Consultants, also acknowledges the importance of the softer, more intangible benefits. Recently, one of his client firms featured in The Sunday Times100 Best Companies to Work For survey. In the two weeks after the article was published, it received ten enquiries from people who wanted to work there.
While there is little doubt that total reward statements are a valuable part of a complete total reward strategy, many employers will wonder how they can enhance the impact of the statements on engagement to ensure that it lasts longer than the week or month in which employees receive them.
Victoria Gash, account director at Caburn Hope, says total reward statements should be available to employees both in a paper format and online. In addition, they should be attractively presented and highly personalised, and the online version, in particular, should be dynamic and constantly updated. “It’s not just about someone’s name at the top of the page. It should include details based on the individual employee’s role and reward structure,” she says.
Jelf Group’s Coles adds that online total reward statements should be accessed like online bank accounts with each employee having their own unique login details. He also argues that a good total reward statement will tell employees what they can expect to receive in retirement, and not just from their current employer’s pension, but also from schemes held with previous employers.
“The best companies will provide both the software to do this and the consultancy expertise to be able to put it together,” he says. Other features, such as employees’ latest commission and bonus payments, could also be made available online all year via the statement which then acts as an ongoing engagement mechanism.
Payslips should also be available to download online, so employees are driven to look at their total reward statements at least once a month and know that these will be up to date, taking account of any rolling bonuses or commission payments. To work best, Carrick says total reward systems should empower employers by giving them information at their fingertips.
Measuring returns
HR teams often have responsibility for measuring the return on investment in rewards and benefits and regular surveys can help with such assessments.
Gash suggests that firms should question staff via paper-based and online “reactionnaires” when employees view their statements. Rather than waiting for months until an annual survey is conducted, a “reactionnaire” allows each employee to provide structured feedback at the point they receive their total reward statement. Organisation’s appraisal systems can also be used to feed responses back anonymously via line managers.
Implemented correctly, total reward can clearly enhance employee engagement, but reward statements alone may have little impact, especially if they are only issued annually. Instead, employers would benefit from communicating their total reward strategy throughout the year.
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CASE STUDY: National grid
National Grid introduced total reward statements for its employees in 2004 and a flexible benefits scheme in 2005. It measures engagement via a group-wide employee survey twice a year.
The benefits on offer include personal mobile phones, the ability to buy or sell up to three days’ holiday a year, private medical insurance, personal accident insurance, childcare vouchers and discount schemes, such as gym and RAC membership.
The overall response rate for the 2006 engagement survey was 58%, and the company believes that since the introduction of total reward statements, it has seen an increase in positive feedback in its surveys.
Sharon Battersby, policy manager, reward and benefits, says: “Survey results indicate that employees have seen an improvement in the way we communicate benefits. The increase can be attributed to the introduction of the flexible benefits scheme and total reward statements for all staff.”
She adds that the latest survey indicated that, in general, National Grid employees are motivated and willing to go the extra mile to help the company succeed. It also found that employees are confident about the future of the company and that most understand how they can contribute to its success.