The Importance of Compensation in Total Rewards Programs

In light of the tight labor market, employers that haven’t focused on total rewards can find that refreshing their strategy can pay major dividends in engagement, recruiting and retention.

While pay is frequently the highest priority for employees, work-life balance, a strong benefits program and a transparent career path can be equally important. In essence, it’s the package of compensation, benefits and other elements that improve an employee’s quality of life, or Total Rewards.

This concept is not new, but present circumstances make it urgent for organizations to reevaluate their compensation program through a Total Reward lens.

It is important for an organization to articulate why it is an attractive place to work. Employers can accomplish this through the employee value proposition (EVP), which represents everything of value employers offer to their employees. A strong Total Rewards program forms the foundation of a successful EVP.

Compensation importance in Total Rewards and EVP

There are not-so-subtle metrics that point to organizations delivering a suboptimal EVP: Weakness in engagement, attraction, intent to stay, and internal dissatisfaction with the EVP itself.¹

An EVP needs to reflect what employees want and need — and nearly two-thirds of job candidates say “pay and benefits” is their top priority in seeking a new position.²

In this environment in which employers need to balance demands for higher wages with the bottom line, the Total Rewards program stands front-and-center. Organizations need to show the workforce they’re delivering value in compensation and benefits, and in ways that go beyond the number on a paycheck.

Intangibles are key in this balancing act and should be a major part of the EVP. Right behind pay and benefits, 61% of job prospects feel work-life balance and personal wellbeing are a “very important” priority.² Employers need to make these part of a Total Rewards compensation strategy, and thus, their EVP.

Workplace flexibility a must-have

Flexibility once was offered as a benefit, such as working four 10-hour days or offering limited telecommuting. But employees now view flexibility as a mandatory condition of employment.

With many jobs hiring as fully remote now, employers need to reexamine what “flexibility” means to different generations of workers. They need to ensure the promise aligns with the expectations of current and new employees.

Total Rewards should also focus on other types of intangible benefits and include them as part of talent strategy. Being able to do their best work — work that plays to their strengths — is highly important to job candidates, as is the promise of greater stability and job security.²

The trick is for employers to understand what excites people about their work, make sure that they support that in their EVPs and actions, and find ways in their recruitment strategies to show how this promise takes form. Baking in these intangible benefits to a Total Rewards approach and the EVP is just as crucial as higher salaries.

HUB International’s team of compensation and benefits experts work on a diverse range of HR needs, from risk management and regulatory compliance to benefits strategy, program design and workplace culture.

¹ Gartner, “Make Way for a More Human-Centric Employee Value Proposition,” May 13, 2021.
² Gallup, “The Top 6 Things Employees Want in Their Next Job,” Feb. 21, 2022.