The Reward in Total Rewards

Mar 31st, 2023 | Hire Wire

Spring is coming and hopefully you are breathing a sigh of relief that snow is no longer in the forecast and you made it through yearend! If no one has thanked you recently, we see you and we thank you for shepherding your organization through yearend reviews, bonus and merit increases, and if you’re that unlucky on the timing, open enrollment too!

The end of Q1 puts lots of big HR events in the rearview mirror, but one to not let the opportunity to pass you by is Total Rewards Statements.

What are Total Rewards?

The total in Total rewards refers to the non-cash monetary value of employment at your company. Cash would be compensation and bonuses, the money that hits an employee’s bank account. Non-cash are things like employer contribution to benefits, retirement plan contributions, monetization of paid time off, company stipends, tuition reimbursement, professional development/trainings, company car or cellphone. There is economic value to employees for these employer-paid benefits that does not hit the employee’s bank account, but it would if they had to pay out-of-pocket for all of this.

What does not count as a Total Reward?

Generally speaking, any costs of doing business are not reflected in a total rewards statement. Things like office lease, supplies, computers, equipment, etc. Yes, these are costs associated with employees, but you have to provide an employee with a computer, for example, if you wish for them to do work for you. The concept of total rewards are costs that the company is shouldering which primarily just have value for the employee (i.e. there’s no benefit to the company that you help the employee save for retirement).

The Gray Area – Employer-paid payroll taxes

If you research examples of total rewards statements, you’ll likely see many that include the employer-paid Federal, Social Security, State, etc taxes. It’s allowable by proxy of, if others put this in their statements, you can too. I, however, do not feel this should be in the statements and put these expenses more in the category of cost of doing business than an economic benefit to employees. You could argue that Social Security is of benefit to employees…down the road…but let’s not open that can of worms on whether that money, dollar for dollar, will be seen come age 67. When these costs are on these statements, employees largely brush it off because those are dollars they will never see come their way and, in my opinion, it erodes the purpose of the statement.

How does one go about forming and distributing Total Rewards Statements?

Statements are easy, if you have the data. Some of the data may be in your payroll systems, but you may need to work with your finance/accounts payable team to get some of the data as well. Getting the data is the hardest part. Once you have it, Excel and mail merge are your friend!!

Final Thoughts

It takes time and effort, but you (and your employees) will be surprised when you look at a statement and see how much value there is in the benefits and other perks the company provides. Often it’s 30-40% of salary which means the total on your total rewards statement will look very impressive!! And if your company is generous in its cost-sharing of medical premiums, you absolutely should do total rewards statements as that value is hidden unless you bring it to employee’s attention.

What’s the reward in Total Rewards?

Retention. Reminding employees of all the cash and non-cash value they receive from the company will help them think twice when that recruiter reaches out about another opportunity.