The competition to attract, engage, and retain skilled workers is intense. Employers must effectively communicate the value they provide to both job seekers and current employees. One way to achieve this is through the use of total rewards statements.
Let’s dive into all you need to know about total rewards statements and how to put them into practice!
Contents
What is a total rewards statement?
Why your organization needs total rewards statements
What are the key components of a Total Reward Statement?
Total rewards statement template
Total rewards statement examples
Steps to implement a Total Reward Statement
What is a total rewards statement?
A total rewards statement (TRS) is a personalized document that provides a comprehensive overview of the overall value the organization offers to the employee as part of the employment relationship. In simple terms, it quantifies the total benefits of the employment for the employee, reflecting both financial compensation and non-monetary rewards, and highlights how these elements come together as part of the organization’s broader strategy to recognize and support the employee’s contributions.
It’s part of the organization’s total rewards strategy.
A TRS aims to be as thorough as possible. Very mature organizations also include access to specific employee offerings such as employee wellness programs, learning opportunities, and other employee services as part of their TRS. The total rewards statement is created through the collaboration of various role players, but usually, it’s owned by the Compensation and Benefits team within HR.
Practically, total rewards statements can be used effectively as part of the negotiation process with new talent and internally to serve as a way for employees to become aware of the value offered by the organization. This, in turn, contributes to employee engagement and retention.
A TRS is also one of the most effective ways to communicate the holistic employee value proposition. If done well, a total rewards statement usually attracts a high level of employee interest and adoption.
Why your organization needs total rewards statements
With 1.2 jobs available for every unemployed individual in the U.S., the war to attract, engage, and retain talent doesn’t stop.
According to a recent survey, 75% of companies globally are reporting a talent shortage. In countries like Japan, Germany, India, and the United Kingdom, talent in specific critical skill areas is becoming hard to source and even harder to retain.
In this environment, total rewards statements can be a powerful tool in your talent strategy and contribute toward your talent attraction and retention efforts:
Becoming an employer of choice
The competition for talent, especially critical skills, has become a race between employers trying to position themselves as an employer of choice and, importantly, as an organization with a unique selling proposition to their employees. Candidates and employees compare employee value propositions, and they provide feedback on public platforms such as Glassdoor and LinkedIn on company offerings and their experiences of the employment relationship.
Total rewards statements are becoming more commonly used and will become a key part of talent attraction and employer branding. Organizations that struggle to articulate their value offering run the risk of not being able to compete for talent in a highly constrained market. They also lose internal talent as employees perceive others to provide better reward options. Whether this is true or not is not the main issue; it’s how well you manage this perception and create real insight into what you offer as an employer.
Total rewards statements help the organization articulate how they are bringing the employer brand to life in an authentic and tangible manner.
Showcasing the value of the employment relationship through total rewards
The reality is that most employees do not have a good grasp of the benefits offered to them. Often, HR efforts to create awareness on aspects such as employee benefits fail due to a lack of foundational understanding of rewards. A study found that 40% of employees don’t understand their total rewards, 38% don’t even understand the basics of their payslips, and less than half of employees have had their payslips explained to them. That’s where a total rewards statement adds value.
TRS is an effective tool to help employees understand the holistic value of working for the organization. It influences employees’ perceptions of what their organization offers.
Let’s make this practical.
John works for a manufacturing organization and earns $55,000 per year. His friend, Sandra, works at a competitor and earns $65,000 a year. Upon first glance, it seems that Sandra is better off. Yet, when considering that John’s organization also provides subsidized medical insurance, a healthy pension fund contribution, subsidized meals, and flexible working options, the perception of value starts to change.
To help John understand the true value of the employment relationship, a TRS paints a more holistic picture than traditional payslips or benefit statements. It includes a broader perspective of reward that highlights elements of the employee experience.
In our video series HR Dialogues, we talked to Professor Xavier Baeten from Vlerick Business School and discussed how organizations could rethink total rewards and transparency in remuneration. See the full conversation below:
Helping employees become aware of personalization options
Personalization of rewards has become more critical over the past few years with the rise of the employee experience movement. The ability to provide employees with the choice to tailor the value proposition to their circumstances has sparked a lot of debate within the reward community. On the one hand, personalization makes sense and creates value for employees. However, others believe that personalization will bring about challenges regarding pay equity.
Regardless of your organization’s perspective, a total rewards statement provides an opportunity for employees to have a choice within some of the more traditional rewards components. For example, many 401(k) contributions can be adjusted up or down, health insurance plans often provide various coverage options, and the pay mix can be customized to include bonuses.
A TRS makes employees aware of the choices already available within their total rewards packages and creates a sense of personalization.
What are the key components of a total rewards statement?
You should view your total rewards statement as a product brochure that is utilized to sell the value you offer as an employer to prospective and current employees. The key components of a TRS can be divided into four categories:
- Financial rewards: Elements that translate into actual monetary value, e.g., salaries.
- Monetary benefits: Elements that are quantifiable and paid on behalf of the employee to other providers, e.g., medical insurance.
- Non-financial rewards: These include quantifiable benefits that are not paid in cash, e.g., learning budget.
- Intangible rewards: This category includes other value proposition elements that are difficult to quantify, e.g., flexibility and equipment.
Organizations might not have all the categories as part of their total rewards offering. They need to implement categories that apply to what they offer to employees. A good practice is to compare your end-to-end employee value proposition, including other employee services provided by partners such as facilities or corporate social responsibility, to evaluate all elements represented in the total rewards statement.
Total rewards statement template
A total rewards statement template helps you create individual TRS quickly and streamlined. You can present your organization’s unique offerings and showcase the entire employee value proposition.
By standardizing the format, all statements stay consistent while allowing for customization to reflect each employee’s specific benefits and rewards.
Here’s what your total rewards statement template could look like covering the four categories of rewards:
Total rewards statement examples
To make this practical, let’s take a look at two examples of what a total rewards statement could look like based on the template above.
Example 1: Senior Software Engineer at a large technology company
Example 2: Sales Manager at a B2B SaaS company
Steps to implement a total rewards statement
When starting with a total rewards statement at your organization, the implementation process is just as important as the actual TRS product.
Let’s look at the steps required to implement a TRS effectively.
1. Educate employees on rewards and the purpose of the TRS
TRS will only be effective when accompanied by a robust education campaign for employees and specifically for managers on the basics of rewards.
Be aware that a total rewards statement will spark a lot of interest and questions. Even though this is a good thing, it can lead to discontent if not appropriately managed. It is essential to position the rationale for implementing a TRS and how it fits with other human capital initiatives, specifically related to the employee value proposition and experience.
Depending on the organizational context, education campaign requirements will differ. At a minimum, however, there should be:
- Basic communication explaining the TRS and its value
- An opportunity for employees to ask questions via a Q&A
- An FAQ document for both managers and employees
- A support guide that explains the basics of the statement and terminology.
2. Enable HR, support employees, and line managers to engage with employee questions
It is good practice to equip your HR business partners, support teams, and line managers with the basic knowledge to help explain the TRS to employees. Try to cover basic terminology, the process of determining rewards, and how the organization approaches the reward cycle.
Inevitably, this process leads to discussions on how your organization determines pay. You need to ensure that you explain that transparently, helping employees to build trust in the process.
This is also an excellent opportunity to create a FAQ document that you can share with others to answer specific questions for first-time users of the total rewards statement.
3. Develop the statement and choose the right technology
The development of the actual statement will require the collaboration of several key players. Internal Communications, Compensation and Benefits, Payroll, People Analytics, and IT will be involved in designing the statement, creating the communication plan and key messages, providing the data, and ensuring that employees can generate statements at scale.
Develop a few mock-up versions and test them with your employees to determine what information is useful to include.
A variety of HR software is available to help you visualize the total rewards statement. However, your core HR data and HRIS should inform your technology choices. Visualization is the easy part of building a TRS; it’s the data accuracy and collecting information that is more challenging.
Always view the TRS from the employee’s perspective and avoid financial jargon and complex terminology. There is more value in viewing the TRS as a marketing document that sells the reward offered to the employee in an understandable and straightforward manner.
Here’s what your one-page total rewards statement could look like with the key sections mentioned above:
4. Validate data and checking quality
One of the biggest challenges is ensuring data integrity and accuracy at scale for the total rewards statement. Before you launch, try drawing a cross-sectional sample of generated TRSs and evaluating their accuracy and correctness. This is tedious work but extremely important to ensure the TRS’s credibility.
5. Launch your total rewards statements
Once ready, you can launch the TRS and let employees know they can access their statements. Be sure your technology can handle the increased traffic. There have been numerous examples of organizational systems being unable to cope with the entire workforce accessing their TRS on the day of launch. You might need to consider a sequential release to ease the burden on tech and support.
You should also be cognizant of the timing of when you want to launch the TRS within the context of the broader reward cycle. It might be a good idea to align the launch to an event, such as bonus payments or allocations. Alternatively, you can commence with some new benefit information available to employees.
6. Measure the impact
Be sure to include some measures in terms of the impact of the TRS. Operational metrics are important, such as % of employees accessing the statement or the number of errors as well as employee feedback on the impact of the statement.
In the longer term, you should measure the impact of the TRS as part of the evaluation of the employee perception of the employer, either as part of an employee satisfaction survey or engagement initiative.
7. Evolve the statement
Lastly, you can evolve the statement over time to include more reward elements. Several organizations adopt a minimum viable approach and launch their first total rewards statement by only including basic financial information before adding more reward categories. This approach allows for faster execution and continuously educates employees on how to understand and engage with the TRS.
A final word
The war for talent will be won or lost in the perceptions and lived experiences we create for employees. In the world of employee value propositions and experience, the understanding and experience of reward will become an essential differentiator influencing talent decisions to join or stay.
A Total Rewards Statement is a valuable tool for creating awareness of the true value of the employment relationship and continuously educating employees on this value.
