Total rewards: One concept, many monikers

Results from the reader survey on total rewards

The majority of organizations have adopted a formalized total rewards approach to compensation and benefits, but the phrase itself isn’t catching on, according to a recent survey of Canadian HR Reporter readers.

While 59 per cent of 191 respondents have adopted the philosophy, only 27 per cent use the term total rewards to communicate compensation and reward practices to employees. (For more on what total rewards is, see “The total rewards concept defined,” Page R2.)

What do firms include in total rewards?

Pay, health plans and dental plans were almost universal in their inclusion in total reward programs.

Other components listed by respondents included:

•learning and career advancement;

•recognition;

•pension plans;

•positive work environment;

•employee assistance plan;

•work-life support;

•wellness programs, such as immunization clinics, fitness memberships and smoking cessation;

•free lunches;

•flexible work arrangements;

•interest-free loans;

•paid sabbaticals; and

•discounts.

Other terms for total rewards

The majority (73 per cent) of firms don’t use the phrase total rewards to communicate compensation and reward practices to staff. Here’s a sampling of other terms used:

•total compensation;

•total work environment;

•employee value proposition;

•VIP and group insurance;

•reward and growth program;

•compensation philosophy; and

•comprehensive remuneration.

Others said they don’t use any term and that it is simply communicated to employees as a benefit of working for the employer, or that the company likes to simply think of itself as a caring and supportive community without labelling the benefits program.

Educating employees the driving force

For firms that have embraced total rewards, the driving force is to ensure employees are aware of the full range of benefits and their value, and that salary isn’t the only form of remuneration received.

One respondent said it is a great way to maintain happy and motivated employees, while another hoped the strategy will help make them an employer of choice. One respondent from the non-profit sector said pitching the value of rewards other than pay is helpful in a climate where salaries are restricted.

Another views it as a way to compete for good recruits without having to pay employees a higher salary than competitors.

Programs tweaked on an ongoing basis

Most respondents seem to make at least minor tweaks to programs on an ongoing basis. Wellness programs have been added to some programs while other organizations have tried to improve employee communications.

One respondent said the company is looking at producing a written annual statement to show employees the full value of the rewards given by the company.

Employees not involved in plan creation

The majority of respondents (58 per cent) did not involve employees in the creation of the program. For those that did, most used employee surveys, focus groups or other committees to get input.

Unionized workplaces dealt with plan creation at the negotiating table.

50/50 split on involving employees in evaluation

Respondents were split right down the middle, with 50 per cent stating that employees are involved in evaluating the total rewards program.

The most common avenues for input are employee surveys, though one respondent said employees “vote with their feet” and simply head for the exit if they’re not satisfied with the program. Another respondent uses exit interviews as a way to get feedback on how employees viewed the program.

Firms without programs planning to implement one

The majority (61 per cent) of respondents that said they did not have a formalized total rewards approach said they are considering implementing one. The vast majority of that group said they plan to have some variation of this approach adopted within the next two or three years, with less than 10 per cent stating that it was not likely. (See figure 3.)

Respondents without a formalized total rewards approached were asked how their organizations ensure rewards and compensation programs attract the right talent and generate maximum employee engagement.

Answers ranged from simply “they don’t” to resistance from owners to adding any science or strategy to compensation. In that case, the respondent said “compensation is a source of great dissatisfaction with our employees.”

Respondents in unionized environments said it is hard to implement strategies like this because of the union mentality that all workers are entitled to the same thing.

Others said they are hamstrung by not having an approach and were constantly reacting to the market, rather than putting a proactive plan in place.

Some said they rely on salary and wage surveys with competitors.

About the survey

The survey was conducted by e-mail between Jan. 14 and Jan. 19, 2005. A total of 191 respondents completed the survey.

What employers are doing

Patrick Welsh is looking forward to taking the concept of total rewards for a spin. Welsh, manager of executive compensation and benefits for Toronto-based ING Canada’s insurance wing, said the company plans to progress to total rewards within the next couple of years, though nothing is carved in stone at this point.

Currently ING Canada uses a total cash compensation approach for its 6,000 staff, focusing mostly on pay and bonuses. But it offers employees a wide range of rewards including flexible benefits, service awards, fitness memberships and training and development.

“The first stage is definitely to package it, that’s the first step,” said Welsh. “But as we’re doing this, we can start the assessment of what we do have and whether this is what we want to offer.”

Nilesh Daya, an HR generalist with Sysco Food Services of Ontario Inc., a food distributor in Kingston, Ont., said the company classifies its program as a rewards program, though it doesn’t market it that way to employees.

Rewards for employees include pay, benefits, a defined contribution pension plan, employee stock purchase plan and tuition reimbursement.

The company recently implemented a quarterly recognition program, on top of its service awards, to reward its 146 staff for productivity, attendance and safety. Peers can also nominate each other for recognition.

Winners are given gift certificates that can be redeemed at selected retail stores around the city. Daya said the company spends about $25,000 a year on the quarterly recognition program.

The company also pushes wellness, including offering flu shots and a cholesterol, blood pressure and glucose clinic. It’s easy to see the benefits of such programs, he said, as employees who receive a flu shot tend to have the best attendance records.

“We have all the programs in place,” said Daya. “We just try to advance and improve on them as much as we can, and look for new and innovative ways to reward employees. We have a solid reputation in the city (as a good employer) and we want to maintain that reputation.”

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