What Are Total Rewards in Human Resources?

Total rewards in human resources refer to programs that focus on rewarding employees with pay increases and other incentives based not on seniority or position but on employee achievements that help organizations reach strategic goals.

HR directors have experimented for years with total reward strategies that blend monetary and non-monetary awards. They’ve found that HR total rewards programs generate strong results, ranging from better individual and business performance to higher levels of employee job satisfaction, loyalty, and morale.

The total reward strategy has become so widely used that Touro University Worldwide offers a Master of Science in Human Resources with a concentration on Employee Engagement and Total Rewards. Graduates from the program have the expertise to become leaders in modern HR departments.

Why Businesses Choose a Total Reward Strategy

HR total rewards go beyond salaries, insurance, and perks to include personal and professional growth opportunities and create a motivational work environment. They also provide a large-scale approach to creating organizational change.

By putting an HR total rewards program into place, businesses receive a variety of benefits:

• Outperforming competitors: Businesses can attract the best talent in their industry by offering rewards that competitors do not offer.
• Retaining top talent: Getting top talent is one thing. Retaining talented employees often requires just the kind of extra benefits that HR total rewards provide. Monetary and non-monetary reward strategies can help organizations retain top talent and be an employer of choice for candidates.
• Motivating better performance: Benefits given for achieving goals, such as monetary awards and flexible work schedules, provide an excellent motivational tool for employees.
• Development opportunities: Rewarding employees with training programs that further develop their skills help the individual employee. Employee development positively impacts the company as enhanced skills make employees more productive.

Types of HR Total Rewards

The wide variety of potential rewards is another reason businesses put innovative HR total reward programs into place. The World at Work, a total rewards association, places most reward programs into general categories: compensation, benefits, well-being, training/development, and recognition. Specific rewards can include:

• Merit pay
• Promotional pay (for taking on a new job)
• Flexible work hours
• Paid time off
• On the job coaching and training
• Fitness center membership
• Off-site training and education
• Profit-sharing
• Stock options
• Annual or goal-oriented bonus plans

The World at Work writes that, when used properly, human resources total rewards lead to “optimal organizational performance” and also help organizations “fuel motivated and productive workforces that feel appreciated and rewarded for their contributions, driving the organization to ever greater success.”

How to Implement Human Resources Total Rewards

Implementing an HR total rewards program involves a series of steps. Creating a team that will oversee the design of the program is the first step. The best teams include executives, managers, and front-line employees, with facilitation and consultation from HR. A diverse team will develop the most well-rounded HR total rewards program.

The team assesses the current compensation and benefits system to determine what is working well and what isn’t. This process should include a survey of employees to gauge their opinions on the current system and what changes they would like to see. The Society of Human Resources Management writes that the project team must then use this information to determine:

• Who is eligible for rewards?
• What behaviors or values will be rewarded?
• What type of rewards work best?
• How will the company fund the program?

Using these questions to guide them, the team designs a plan that establishes what employees must achieve to become eligible for specific rewards. The HR department puts the system into place and manages its operation. Continuous evaluation is important to discover what worked and what parts of the program require modification or elimination.

Professionals earning a master’s degree in human resources can learn how to develop and implement a total rewards program. As employers become more sophisticated in rewarding and recognizing talented employees and remarkable achievements, HR leaders play a key role in designing and managing total rewards systems.