By: Jennifer Paterson, Employee Benefits; London

Many diverse elements can be included in an employer’s total reward strategy, adding up to a valuable employment package, says Jennifer Paterson

Total reward has no hidden meaning – it does exactly what it says on the tin. But in some cases, the term is used to describe total reward statements that are used alongside perks such as a flexible or voluntary benefits scheme.

However, a true total reward strategy comprises much more than this, including salary, bonuses, pension and healthcare benefits, plus wider aspects of the employment package such as training and development, the working environment, and an employee’s work-life balance. These can all add up to a total value of everything staff receive as a result of working from their employer.

The concept of total reward began in the 1970s and 1980s, growing out of the term ‘new rewards’, says Peter Reilly, director of HR consultancy at the Institute for Employment Studies (IES). “One of the characteristics of that new reward movement was to take a much broader view of what reward constituted rather than simply concentrating on the tangible, extrinsic rewards,” he says.

In the context of total reward, the employment proposition has historically been split into four categories: pay, benefits, career development, and the work environment. Over time, the boundaries between these have blurred. Julia Turney, head of benefits management at Jelf Employee Benefits, says: “Total reward today encompasses a large range of offerings, broader than the standard four brackets, including the nature of the leadership, corporate social responsibility, and work-life balance.”

There is no single approach to constructing a total reward strategy because different employees will be interested in different aspects of the proposition. The IES’s Reilly says: “A catering assistant or cleaner may be attracted to an organization primarily because of the intrinsic rewards, pay and good working hours, whereas for professional staff, like engineers, the principal issue will be the career offered and CV building. In the public sector more than the private sector, it is the mission or value of the organization. Staff work for [companies like] Selfridges or Virgin because they like the name and what it conveys. Equally, staff might work for a charity like Save the Children or Oxfam because they believe in what it does.”

Andrew Erhardt-Lewis, senior manager at Deloitte, adds: “At Google, total reward would include the fact that staff can wear jeans and can bring their dog into work.”

Career development

The opportunity for career development is an important aspect of total reward for staff looking to add value to their future. Chantal Free, director and head of reward, talent and communication at Towers Watson, says: “Employees are much more self-centric, and it is a lot more about them and their lives. The deal with the employer is that they know they are not going to be together for ever, and what [employees] want to get out of the employer while they are together is fair reward for [their] contribution, but also the right skills and capabilities to make them marketable for their next job.”

During the recession, learning and development opportunities were often among the first things to go, but these have now started to return, says Mark Childs, director of Total Reward Group. “Longer term, as employers have attached more importance to experience rather than qualification, a lot more staff are going through on-the-job training,” he says.

Another important element of total reward is the working environment and organizational culture. For instance, at private equity firm Apax Partners, staff have access to a free breakfast and lunch every day. Erhardt-Lewis says: “The climate, or the culture, at an organization can engage staff and pays for them in the non-traditional sense.”

Jelf’s Turney adds: “I had a client that moved to a new office with a gym on site, subsidized canteen, plants and a wide, open place to work. It had a lot of feedback from people coming through the office and that was a big thing – to create a pleasant place to work.”

Helping staff achieve a good work-life balance is another part of total reward. This can include flexible working and career breaks. Free says: “This plays to the diversity agenda. If an employer has the right environment and a nice work-life balance, it can look at issues more flexibly and have more diverse talent.”

In the current economic climate, the concept of total reward strategy is coming to the fore, especially as employers widen their packages to include more than traditional pay, bonus and perks. Stuart Hyland, UK head of reward services consulting at Hay Group, says: “Organizations are thinking how to motivate staff and get more return on investment from their people. A lot of the stuff in that intangible bracket can be fairly low-cost development work. This is attractive when budgets are low but an employer is aiming to improve engagement and motivation.”

Total Reward Group’s Childs adds: “Employers will be reluctant to hike up base salaries. Instead, they will try to differentiate themselves through a total reward offering.”

The term total reward is often confused with total reward statements, which are a tool to communicate the value of a package. Mark Carman, director of communication services at Edenred, says: “A total reward statement is the pinnacle of the communications programmed, but it is also worth researching employees’ perceptions of their benefits.”

Total reward statements carry details of salary, pension contributions and the benefits an employee receives, but the concept of wider total reward can be harder to communicate. IES’s Reilly says: “It can be communicated well at the attraction stage, but it is harder to do while in employment.”

A total reward strategy should also be aligned with an organization’s brand and culture, says Hyland. “Many organizations are trying to ensure their reward practice is aligned with company performance.”

If you read nothing else, read this

* Total reward has traditionally been divided into four categories: pay, benefits, learning and development, and working environment.

* It takes account of the fact that no two employees are seeking the same thing from their employment proposition.

* Total reward will see a resurgence as the UK emerges from the downturn.

* A true strategy is very different from just offering total reward statements.