Debi O’Donovan: The concept of total reward

Debi O’Donovan, editorial director of Employee Benefits: The concept of ‘total reward’ seems to be gaining ground in recent years, at least on the benefits conference and consultant circuit.

However, many benefits managers still battle to pin down exactly what it looks like in the workplace and how on earth they can go about implementing it. Not that there are a shortage of four-box models and graphs to help explain total reward; however it can be like pinning jelly to the wall when trying to get to the nub of how it differs from an ordinary reward strategy.

The most common understanding of ‘total reward’ is that it is made up of four key areas: benefits (including pensions); pay and bonuses; work environment; and learning and development. Pulled together, this makes up the total reward an employee gets for working for their organisation.

However, for total reward to really work as intended by the reward gurus it goes a much broader than this. The four reward aspects are weighted according to the employers’ HR (and ultimately business) drivers and strategy. So this is when things get tricky and helpful consultants move in to demonstrate how the different total reward levers can be pulled to influence HR objectives. And at this point many employers realise this is simply too big and complex for them – as enticing as the idea is – and they abandon the idea.

The more cynical among us would say total reward is simply a clever way of dressing up good old fashioned reward strategy that we learnt at HR school. That is, you base your HR strategy on your business strategy; and your benefits strategy on your HR strategy. Your benefits strategy then shapes what rewards you offer.

What we are seeing, are many employers (and sometimes their advisers) claiming to offer total reward, when what they actually have in mind are total reward statements (TRS). Don’t be fooled, this is not quite the same thing as a total reward strategy, instead it is a highly effective communication tool that allows employers to spell out to each employee (in a statement or on a payroll slip) all the pay, benefits and, possibly, training courses, that each employee receives.

TRS are pretty commonly offered now, so any employer playing seriously in the recruitment or retention stakes without one is going to be handicapped. While those top-end employers with total reward strategies in place would claim to be well ahead in the war for talent.