What is Total Reward and Why is it so Important?

Here at Reward Heads, you have probably heard us bang on about the importance of Total Reward! We truly believe it is fundamental that all organisations need to consider the full reward package, not just cash elements, in order that they can stand out and attract and retain key talent. A Total Reward approach is gaining popularity across many organisations and in People strategies, supporting overall employee wellbeing. Total Reward put simply, is the full package that an employee receives from their employer. This goes beyond the typical 'pay and benefits' package to include less tangible aspects such as flexible working arrangements and opportunities for learning and career development. By understanding and implementing Total Reward effectively, organisations have the chance to truly stand out and ensure long-term employee satisfaction and loyalty.

What is Total Reward?

Total Reward is the all-inclusive approach to employee compensation, benefits and wellbeing, integrating all aspects of the employment experience within an organisation. This typically includes:

• Total Cash: Base pay and short-term variable pay such as bonuses and commissions.
• Longer term awards: such as LTIPs and shares
• Benefits: a huge range such as Health care, pensions, holidays, discounts
• Non-Monetary Rewards: such as Flexible working arrangements, a positive work environment, opportunities for personal development, and career progression.

The Importance of Total Reward

Organisations have traditionally focused on the 'bottom' tiers of the Total Reward, which include basic pay and tangible benefits. However, this approach is becoming increasingly insufficient in today's climate. Whilst competitive pay is necessary to attract talent, it is the 'top tiers', the non-monetary rewards we referenced above that significantly influence employee retention, engagement and overall wellbeing

Maslow's Hierarchy of Needs and the Link to Total Reward

The Total Reward approach is a reflection of Maslow's Hierarchy of Needs. At the base, we have the essential financial pay and benefits that ensure employees can meet their basic needs. Without these, employees cannot focus on higher-level aspects of their work and life, today's current economic climate can be a testament to this. However, if these basic needs are satisfied, employees typically pursue higher-level rewards such as personal growth, recognition, and work-life balance.

Why Total Reward Matters

• Employee Engagement and Retention: Employees today seek more than just their base pay; they typically aim to feel valued, engaged, and supported in their roles and within their organisation. From our experience, we find many employees find desirable; flexible working options, opportunities for career development, and a supportive and wellbeing focused work environment.
• Attracting Top Talent: In a competitive job market, offering an inclusive Total Reward package makes an organisation more attractive to potential hires. Most Candidates will often weigh non-monetary benefits heavily when choosing an employer, with many new recruits already having an idea as to what their 'needs' and 'non-negotiables' are when looking for a new job.
• Increase Productivity and Employee Wellbeing: When employees feel their needs are being met, they are more likely to be motivated and to perform well in their role day to day. A Total Reward approach can lead to higher levels of job satisfaction and productivity.
• Focus on performance - base pay does not communicate what is important to the organisation, what someone would be rewarded for but bonuses are great at this.
• Alignment to values - the wider package enables organisations to reinforce their values and desired behaviours

Trends in Total Reward

To stand out, organisations will have to adapt to current trends in Total Reward. Typically, we have found that these include;

• Flexible Working Arrangements: The pandemic accelerated the shift towards remote and hybrid working models, but in more recent years we have noticed a trend of organisations moving back to a less or even non-remote arrangements, with vacant and unused office space being the typical rationale. Here at Reward Heads, we pride ourselves on being fully flexible (so perhaps we are a bit biased!). Flexibility in where and when work is done can be a critical component of Total Reward, and is normally one of the top attractors for those looking for a new role.
• Focus on Wellbeing: Mental health and wellbeing support, such as counselling services, wellness and work-life balance initiatives, are becoming increasingly important. Today's work environment is seemingly so 'switched on', and we hear the phrase 'burnout' a lot, that many employees will no longer tolerate a decline in their personal wellbeing. We recently published an article on the importance of employee wellbeing which you can find here.
• Personal Development and Career Opportunities: Opportunities for continuous learning and career development are highly valued, especially by Gen Z. Offering training programmes, mentorship, and clear career progression paths can significantly enhance an organisation's Total Reward package. How many times have we heard once engaged employees say that there is just 'nothing more they can gain from working here'? If organisations focus on truly understanding where individuals want to end up in their career, it can truly help to foster a positive culture and loyalty.
• Diversity and Inclusion: Cultivating a diverse and inclusive workplace can help to enhance an organisation. Employees want to work in environments where they feel respected and valued regardless of their background, so having a D&I agenda embedded within the organisation and people plans is fundamental in ensuring the working environment is fit for all employees, from all differing backgrounds.

While many companies offer competitive salaries and basic benefits, Reward Heads have found that organisations who can provide meaningful non-monetary rewards will attract and retain top talent. Employees are more likely to remain with an organisation when they feel engaged, appreciated, and supported in their personal and professional growth.

Total Reward is not just about paying employees well: it's about developing a comprehensive and supportive work environment that addresses all aspects of an employee's experience. By focusing on both tangible and intangible rewards, organisations can improve employee satisfaction, boost performance, and stand out in the competitive landscape.

We offer Reward coaching modules, which are designed to help expand Reward knowledge within your organisation, we have some modules specially dedicated to Reward Strategy, one of which focuses purely on Total Reward- you can find more information on those here - Coaching.

If you feel that your Total Reward package isn't as competitive as you feel it could be, or you want to understand more about how to enhance your current Total Reward Package, then Reward Heads team can support you. Please reach out to Victoria Milford, our CEO, at rewardsolutions@rewardheads.co.uk.

Emma Chamberlain - Senior Consultant