A by-product of raising awareness can be that total reward statements will bolster staff satisfaction, says Laverne Hadaway
Total reward statements are increasingly being used by organisations as a way of getting employees to appreciate the full value of their benefits package. The statements, which can either be paper-based or viewed online, are usually individually tailored to list the monetary value of each of the benefits that a staff member receives.
This will usually include pension contributions that the employer makes on the employee’s behalf, the value of a company car and private medical insurance (PMI). Some statements even tot up and add in the savings that employees make through special offers and discounts as part of the employer’s voluntary benefits package.
Consultants say that total reward statements can cost anything from between £5,000 and £20,000 to set up, depending on the size of the employer, and the same again to run each year. However, Michael Whitfield, managing director of Thomsons Online Benefits says the benefits can far outweigh the costs.
“If you show employees the value of the benefits they have, value can be added for employers, too. [Employers] can spend two years training an employee who may leave after three years. If they could get [employees] to stay for four or five years [by making them understand the value of their benefits package], they wouldn’t need to train or recruit quite so often,” he says.
Helen Murlis, a director at the consultancy Hay Group, agrees. “People have traditionally under appreciated all the elements of their package. Too many [employees] leave an employer without totting up the total benefits package or being told the opportunities available to them,” she says.
Simon Barron, a managing consultant also at Hay Group, says that when employees are asked to estimate the value of their benefits, most say that they believe their package is worth about 10% of their salary. In fact, the actual value is more likely to be 20% to 30%.
Total reward statements can also be used to send out wider messages to the workforce. They can help to reinforce the employer’s brand around reward and benefits and be used to advertise benefits that the employee has not taken up. For example, the statements can point out that an individual is not a member of a share scheme and outline what those staff who have joined have gained so far. “They send a positive message to staff that the employer cares enough to provide a reward package and ensure that the employee knows what he has,” says Barron.
The first stage of implementing total reward statements is to find out how much staff value the benefits they already have. Most consultants advise employers to conduct a series of surveys and focus groups. This will usually include both anonymous surveys and face-to-face research. “Sometimes employers are pretty surprised at the findings. Employers can have quite a misguided view of their employees and what they think,” Whitfield adds.
Probably the most challenging stage of setting up total reward statements is the gathering and validation of the data on which they will be based. To do this it is important that a company is clear on its own policies on who is eligible for which benefits. “Data integrity is vital to the success of reward statements. Imagine the reaction if someone received the wrong statement,” adds Barron. If errors arise, employees’ packages can end up being undervalued or staff can be told they are receiving benefits that they do not have access to, neither of which is ideal.
Format of statements
Once this tricky stage has been passed, attention can be focused on the format and design of the statements, such as whether they should it be paper-based or online, one or two pages or a booklet, and whether things like colour, images and charts are used. Above all, Murlis says that the statement should be clear, not too long and nicely presented.
While an employer could go it alone, particularly if designing hard-copy statements, a consultant will usually be used. It will typically be the consultant’s job to come up with something that fits with the organisation’s brand and the messages that it wants to send. “The message must be consistent with previous communications,” says Barron.
Most consultants recommend some kind of initial pilot to help iron out any issues. This can take between one and three months, depending on how good the employer’s data is in the first instance.
Barron says employers also need to think carefully about the benefits they might introduce in the future, particularly around flexible benefits, and how these could affect the total reward statements. For example, care should be taken to put a realistic value on a benefit when launching total reward statements in case the employer then reduces it when flex begins as employees can then see the price they pay out of their flex pot. “You can devalue the whole exercise,” says Barron.
Although many employers are aware of the value the statements can add, Whitfield says some employers put them in place without having a proper strategy for delivering them or for monitoring their effect.
Public sector catching up
Employers need to ensure that they explain what the total reward statements are to staff and keep reinforcing that message in the following months so employees do not simply receive a statement out of the blue.
Tesco is one employer that has had plenty of experience of total reward statements, having had them in place for ten years. Employees have become so used to them that six to eight weeks before their annual issue the HR department gets phone calls from staff asking where their statements are. The company conducts an annual survey where staff members are able to provide feedback on various issues including their benefits. Mark Roberts, group benefits manager at the supermarket, says that over the years much of employees’ feedback has been incorporated into their total reward statements.
In all, Barron says that total reward statements have become more prevalent in the private rather than the public sector, but there are moves to bring the public sector in line. The Cabinet Office has launched an online total reward toolkit designed to help public sector HR professionals analyse, develop and implement a total reward strategy. The benefits often available to public sector employees which could be communicated via total reward statements include final salary schemes, flexible working and training opportunities.
With many organisations realising the advantages of total reward statements, it seems that more employers will be clamouring to introduce them. Those that already have statements are likely to start looking for new ways to make sure that staff sit up and pay attention to the value of their benefits
Case study – It’s important not to water anything down
Utility company, Anglian Water, first issued hard-copy total reward statements to its 4,000 employees in 2005 and has decided to provide them annually. The firm did this because it had introduced a number of new benefits over the last few years, but felt that these changes were not visible to employees. After some initial research it was decided that the statement should be provided once a year.
The statement illustrates the annual values of each core benefit and provides information on additional benefits that employees are entitled to, including training and development and work-life balance initiatives. The core benefits the company provides include private medical insurance and pension contributions.
Richard Norton, HR services manager at the company, says that the statements were well received. In fact, one employee who had already accepted a job offer elsewhere and had handed in his notice, changed his mind about leaving when he saw his total reward statement.
“We’re trying to ensure that people look beyond their annual base salary,” says Norton. Feedback given to the HR team suggests that the statements appear to be working. One employee reportedly said: “I thought I earned £30,000, but I [now] realise that with the package it’s nearer £40,000 [per year].” Anglian Water is looking to produce online statements in the future.
Spell it out for employees
- Employees traditionally underestimate the value of their reward package.
- Total reward statements allow staff to see the complete value of their benefits package rather than just salary.
- Statements can outline the value of benefits including employer pension contributions, private medical insurance premiums paid on behalf of the employee, any benefits provided through a flexible benefits package and even money the employee has saved through the employer’s voluntary benefits scheme.
- Total reward statements can provide added value for employers in the form of reduced recruitment and training costs.
- Data validation can be one of the most challenging aspects of implementation.
- Employers need to ensure they maximise on the benefits of total reward statements by making sure employees fully understand what they are.