We are in a unique and unprecedented situation in the business world. The pandemic and Great Resignation decimated the workforce and changed the way we worked. A record four million workers called it quits in November 2021 alone, according to the Labor Department. Pandemic burnout, a collective reassessment about priorities and what matters most, a labor shortage and more companies calling workers back into the office may be some of the reasons behind this trend. Employers were short staffed, stretched thin, and one might argue that employees have never had more control and power in the job offer and retention process.
Employers know it is more important than ever to hire and retain the best talent, but how is that possible when prospects and employees have dozens of job opportunities to choose from? Well, employers invest in total rewards. According to Gartner, Total rewards is the combination of benefits, compensation and rewards that employees receive from their organizations. Total Rewards can include wages and bonuses as well as recognition, workplace flexibility and career opportunities.
Total Rewards example:
Salary + Benefits + Perks = Total Rewards
$80,000 Salary + $15,000 Benefits + $7,500 Perks= $102,500 Total Rewards
No longer do employers attract talent solely through salary and basic health benefits. Employers allocate 17-25% over base salary to non-traditional perks and benefits. Now when job seekers view an employer’s career page, they will find a wide variety of non-traditional rewards and perks that will help attract talent. Examples include: work from home, four day workweeks, company equity, charitable contribution matching, student loan repayments, commuter benefits, monetary stipends, and more. From a big picture perspective, it looks like total rewards can solve a lot of issues. By investing and providing employees more rewards outside of base salary and benefits, they will naturally want to come work for an employer and will stay for the long term, right?
Here’s the issue. Total rewards are a total problem.
In fact, here are the 6 reasons why total rewards are confusing, underutilized, and underappreciated by both employees and employers.
The Problem For Employees
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Employees underestimate their compensation
Most employees are wrapped up in what they earn in their base salary. However, most employees aren’t aware of the ‘burden rate‘ or ‘total rewards value’ that is assigned to them and they have no idea how much a company is investing on their behalf. In reality, most companies are spending 25-40% above an employee’s base salary in benefits, rewards, perks, and stipends. Most employees have no knowledge of this additional compensation.
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Employees don’t understand the value of their total rewards package
Willis Towers Watson did a Survey that showed that 78% of their employees underestimated their total compensation. And right now, it’s extremely hard for an employee to see what is in their total rewards package. A separate study showed the more employees knew about their company’s rewards system, the more satisfied they were with it. And with greater satisfaction came greater commitment and engagement at work. Unfortunately, the study also showed that most employees had very little knowledge of how their organization’s rewards system worked.
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Employees don’t have the ability to customize their total rewards package
Lots of the perks and benefits an employer offers are ‘use it or lose it’ or ‘mandatory perks’ that an employee doesn’t want or need. For example, most companies might give every employer a commuter pass, the same amount of equity, student loan repayments, and more. But does every employee need a commuter pass? Does every employee want company equity? And does every employee have student loans that need to be paid off? Most likely, there are rewards being allocated towards employees that actually are doing nothing to attract and retain talent. In reality, every employee is motivated and incentivized differently. They should be able to choose the rewards that fit what they need at that point in their life. The ability to customize and build a meaningful and comprehensive total rewards package for each employee should be an expectation, not a ‘nice to have’.
The Problem for Employers
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Employers don’t have insight into which total rewards their employees’ value
Only 56% of employers understand the current Total Rewards offerings that their employees value. In reality, since most employers offer the same core benefit and reward package to their employees, they have no insight into what is preferred and utilized by each individual. So ask yourself: what rewards attract and retain your sales team? And what rewards do the same for your engineers? Most likely, these different individuals look for very different compensation packages. Ideally, employers want a detailed breakdown of each employee’s total rewards preferences and selections so they know how to incentivize and retain their talent.
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Employers don’t differentiate their offerings from other competitors
Employers aren’t doing much to differentiate their offerings from what their competitors are offering, which affects employee attraction and retention. Only a third of employers globally say they clearly differentiate their Total Rewards offerings from those of their competitors. Far from having differentiated programs, roughly 50% of employers report that their Total Rewards package is “about the same” as competitors’ programs.
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Employers don’t know how much to invest- or where
Most employers have no idea what rewards and incentives make their employees satisfied, they don’t know what perks and incentives motivate the highest performing individuals and market leaders. Currently, this lack of data makes building total rewards packages in a competitive offer letter a very difficult task. What employers seek are data dashboards that give breakdowns on total reward builds by role, department, and geography, and even segment, and industry outside of their company. Additionally, where are rewards trending? Are there new perks and rewards that are being offered in your industry? Or are there rewards that are not worth offering in the future? This feedback loop of data ensures employers are investing in rewards that will attract and retain the best possible talent.
What Can You Do?
Offering customized total rewards is easier said than done, yet it is more important now than ever. Nearly 60% of people say that perks and benefits are among their top considerations before accepting a job. So it is essential that employers enable employees to understand their total compensation, get transparency into what makes up their total rewards package, and have the ability to individually customize meaningful total reward selections. At the same time, employers need to ensure that they fully understand what rewards matter to their employees, that they offer rewards in a way that differentiates their rewards package from their competitors’ packages (like individual reward customization), and that they have ready access to data that reveals trends and which rewards are being used and which aren’t so they can be confident they are investing their money in the right places.
If employers are ready to take that next step, there are software solutions like Bundl that can assist with total reward customizations for you and your team. From there, total rewards won’t be a problem at all. In fact, employers will be able to easily impress prospects, empower employees, and incentivize and retain the best talent for years to come.
About the Author:
Bundl is a total rewards software that allows employees to customize and build a meaningful rewards package that best fits their wants and needs while maintaining employer compliance and guidelines. Bundl offers solutions across all aspects of an employee’s total rewards selection experience from offer letters to merit reviews and promotions as well as company-wide survey and feedback tools. Bundl’s goal is to empower employees and provide a total reward selection experience that is employee-driven and employer-approved. Bundl is based in Denver, Colorado. Learn more about Bundl at bundl.co