Rewards Strategies Meaning, Importance

08/12/2020 0 By indiafreenotes

A total rewards strategy is a system implemented by a business that provides monetary, beneficial and developmental rewards to employees who achieve specific business goals. The strategy combines compensation and benefits with personal growth opportunities inside a motivated work environment.

Designing and implementing a total rewards strategy requires a large-scale approach that drives organizational change. Top executive and management buy-in are critical for the success of a total rewards strategy. Your project team should be made up of decision-makers as well as front-line employees to ensure that your approach is well-rounded and fits the needs of everyone at the table. If you operate in a union environment, it is important to understand that collective bargaining may affect the implementation of your strategy.

Developing a total rewards strategy is a four-step process consisting of:

Assessment: A project team assesses your current benefits and compensation system and determines the effectiveness of those systems in helping your company reach their goals. Activities that take place during the assessment phase of the process include surveying your employees on their opinions and beliefs regarding their pay, benefits and opportunities for growth and development as well as examining your current policies and practices. The most important outcome of the assessment phase is the project team assessment report, which includes your recommendations for the new total rewards system. The assessment report should include suggested solutions to questions such as:

  • Who should be eligible for the rewards?
  • What kinds of behaviors or values are to be rewarded?
  • What type of rewards will work best?
  • How will the company fund this?

Design: The senior management team identifies and analyzes various reward strategies to determine what would work best in their workplace. It decides what will be rewarded and what rewards will be offered to employees for those achievements. In a total rewards strategy, pay rewards for achievement of goals will not be the only consideration. HR strategists will also determine additional benefits (flexible work schedule, additional time off) or personal development opportunities (training or promotional) that employees will receive as a result of meeting the established company objectives.

Execution: The HR department implements the new rewards system. It circulates materials that communicate the new strategy to employees. Training also commences so that managers and decision-makers are able to effectively measure the achievement and employees are able to understand what they need to obtain to receive the rewards.

Evaluation: The effectiveness of the new plan must be measured and the results communicated to company decision-makers. Based on this, modifications can be proposed to the strategy for future implementation.

A total reward approach looks at what your organisation is trying to achieve, what your people want, what is affordable and the structures needed in place to achieve this. The four areas covered are:

  • Cash compensation

Every organisation must pay its employees for the services that they provide (i.e. time, effort and skills). This includes both fixed (salary and allowances) and variable (bonus and incentives) pay. The cash compensation provided to employees increases over time and can be linked to a number of different factors such as performance or career development.

  • Benefits

Organisations use benefits to supplement the cash compensation they provide to employees. These vary depending on the size of the organisation and affordability but can provide security and comfort to the employees and their families. The benefits include holidays, medical cover, income protection and pension schemes.

  • Personal Growth

Providing personal and professional growth opportunities to employees is an essential part of any reward strategy. These can be skills acquired on the job as well as formal training programmes valued by the employees that also serve the organisations strategic needs. Alongside this development, however, is the need to manage expectations, assessing performance and constantly striving to improve.

  • Work Environment

A positive work environment can often be the defining factor in retaining key talent in an increasingly competitive market. Ultimately, we all want to work in an environment where there is genuine feeling of team spirit and togetherness. With a leader that inspires and supports us to achieve success at both work and home.