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Our recommended approach to developing a total reward strategy ensures that everything is considered holistically – to ensure that pay, benefits and HR policies all work together to optimise the value that each employee receives from their employer.

Paydata’s senior reward consultant Joe Price recently outlined the importance of taking a strategic and rounded approach to reward in a free webinar that can take you through the process step by step.

Each reward element should be aligned to the organisation’s overall mission, so that every employee understands the wider vision of the organisation and their role in delivering this. We establish this at the discovery phase, where our research analyses the organisation’s short and long-term priorities in the context of the wider market, alongside economic and political factors. The wider mission of the business should inform each element of financial and non-financial reward frameworks. This ensures that your total reward system is evidence-based and built for the long-term.

When each element is aligned to purpose, this drives the effectiveness of the total reward strategy in tackling current challenges. Here we explore the top five tangible effects of treating reward and compensation questions as part of one strategic reward strategy.

1. A competitive advantage

We can help you to identify the best reward choices that suit your business’ requirements. This evidence-based approach ensures that you put in place the best pay practices and define benefits that deliver true value to employees. A strong total rewards package can elevate your employer value proposition (EVP). By defining what you offer employees that is grounded in research and competitive in the market, this can be a true differentiator.

A strong strategy also helps in times of constrained pay. Companies can identify the right data against which they can benchmark themselves (many opt to benchmark against the median pay), while underlining the investment they make in their people through the total reward package. The cost of living crisis and the impact of the pandemic have put enormous pressures on employers to be clear about the tricky balance of profit and people. Some companies are being accused of putting profits above people, with the strategy followed by P&O demonstrating how a values-led approach is crucial to your reputation as an employer. It is essential to define what environment and value you offer people. The stronger this package is as a whole, the better it will be in attracting and retaining talent that gives you the competitive edge.

2. Fosters loyalty and a sense of belonging

There are numerous options available in terms of what a total reward package will look like and no two strategies will be identical. There are a number of pay structures available, with some structures better lending themselves to performance-related pay and others that manage job sizes. Whatever the pay structure selected, a job evaluation exercise can organise roles and help guide the decision of which framework to select in underpinning pay. Similarly, benefits are increasingly innovative, moving beyond traditional bonus schemes and include volunteer days to give back to communities and granting access to mindfulness apps, offering a wider definition of ‘value’ that is guided by employees themselves.

However the total reward scheme is defined, having something that reflects the company culture and shows an understanding of employees’ priorities will foster a sense of belonging in the long-term. When considering how to drive down employee turnover, it will be the sum of the employee experience that fosters greater loyalty and a keenness to stay with the organisation. Considering all the touchpoints of the employee journey is a good way to map out how the reward package kicks in, from the candidate stage in attracting applicants with a robust set of promises, whether that is flexible working arrangements or collaborative working spaces people want to join, all the way through to whether feedback raised in exit interviews is addressed.

3. Creates an objective framework to champion fairness and promote inclusion

All of the evidence collated in the discovery phase is factored into the design of the total reward strategy, creating a robust system to organise pay decisions and identify the most competitive benefits. Sometimes the mergers and acquisition strategy pursued by some companies can lead to different approaches being implemented or inherited from different arms of the business. It is crucial to take the earliest opportunity to ensure that people feel like they work together, wherever they are geographically based. This avoids equal pay and parity of pay issues where roles are not treated equally in the same organisation, undermining fairness.

An overarching total reward strategy helps to frame decisions and equip line managers with an objective framework to inform their pay and performance management decisions. This bolsters consistency in pay decisions and gives line managers a reference to make evidence-based decisions. This can support the diversity and inclusion journey of each business, as frameworks supporting pay and reward decisions that are objective can help embed wider diversity and inclusion initiatives. Employees can also feel safe in the knowledge that they are being treated equally.

two man shaking hands in office

4. Reduces costs associated with recruitment and retention difficulties

As the pandemic created an employer’s market, a buoyant labour market is set to define 2022. With one third of UK employees considering getting a new job this year, 23 per cent say that a lack of pay rise is a driving force in that decision-making process. Employers are looking to implement pay awards that help with the rising cost of living as much as they can, to support staff; this, and reinforcing the sum of the total reward strategy for employees, can help to ease this period of financial uncertainty.

One of the main drivers of employee turnover is pay but it is crucial to consider the risks of losing them in a market where the competition for talent is high. Early indications of the pay award increases for 2022 from our UK Reward Management Survey, which is currently live, are around three per cent. Traditionally employees will expect their pay to rise by the rate of inflation, so as far as affordability allows, try to bear this in mind to avoid incurring costs of replacing employees. It is estimated that it costs around £30,614 to replace one employee. Therefore, continually keeping pay competitive drives down employee turnover and impacts the bottom line.

5. Keeps businesses agile

The pandemic has instigated fundamental shifts in ways of working. Businesses had to transform overnight and the most successful were able to thrive under unprecedented circumstances. A total reward strategy requires regular evaluation to ensure each part is working effectively. Measuring metrics such as time to fill each vacancy, applicants per vacancy and the quality of applications can monitor the success of external perceptions about their offers to employees. Continually seeking employee feedback through pulse surveys and creating concrete actions based on employee opinions is important to keep systems agile.

A total reward strategy that is grounded in research and continually evolves with regular evaluation is necessary to remain fit for purpose. The latest market data needs to be factored in to ensure that the approach remains competitive. Wider staff surveys can monitor the ongoing success of the reward package before it becomes too embedded, enabling you to address this as quickly as possible. With one third of workers experiencing unmanageable workloads according to a recent YouGov poll, reducing recruitment and retention pressures is crucial. 38 per cent reported that their workload is affecting their mental health – underlining the importance of having reward systems that foster, attract and retain strong, cohesive workforces that can remain agile.

Get in touch

Read more about each stage of designing an effective total reward strategy. We would welcome the opportunity to talk through how we can support you at any point in your journey in defining the total reward strategy that suits your organisation. We can help you to put together the business case for reviewing your approach that covers the tangible benefits to the business to help engage and secure buy-in from key stakeholders. Contact us to discuss ways in which you can strengthen your business now and in the future.


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