Basics

The concept of Total Rewards encompasses all the tools available to an employer in order to attract, motivate and retain employees. To an employee or candidate seeking new employment, total rewards indicate the form and value of returns from the employment relationship. Total rewards package typically contains elements of salary, all kind of rewards, benefits, work-life balance and flexibility, performance, recognition, growth and development. 

Implementing a total rewards model is one of the most important HR practices because it is an integral part of the employment relationship. In most business settings, compensation provisions (e.g. salary, pay for performance) and benefits have to be included in the employment contract. Elements of total rewards are also important in shaping psychological contracts, which are based on unwritten expectations and promises regarding employee and employer obligations. Total rewards model is a powerful managerial tool as it is the best way to communicate what is important (business vision, mission, objectives and values) and how a company creates value. Through pay for performance, companies can link individual and team performance to strategic objectives. Besides cash compensation (e.g. base salary and performance bonuses), most high performing companies provide other non-cash rewards, benefits and perquisites, that create attractive and competitive total rewards packages. This contributes to their attractive employer brand, as compensation is important in describing employee value proposition. Therefore, total rewards model determines the ability of a company to attract, manage and retain talents. 

Although in most settings, base salary is the largest part of a total rewards package, nowadays many companies use individualized compensation packages, which reflect the realities of a diverse workforce (different expectations, needs and preferences) and different work arrangements (e.g. flexible work, gig economy). Individualization is very important for SMEs as they usually have limited resources and cannot compete with salaries offered by larger companies. Nevertheless, they can compete for talent by responding to their needs and wishes. Of course, the amount of salary is very important for the young as they are establishing conditions for their independent life or forming new family. However, GETM3 research suggests that salary is not at the top of the list of their expectations. The young value personal development and well-being. For them, rewards and recognition are very important and by using them properly, companies can affect their engagement and commitment to stay.