The latest research shows that using total reward statements (TRS), to communicate the value of an employee’s total package can boost the perceived package by 42% in comparison to not using them.* A great way of communicating the value of other elements within your offering outside of just basic pay, this guide examines how best to implement TRS.
How to implement total reward statements
The first consideration is whether to implement total reward statements as part of another initiative such as flexible benefits, or to implement them as a standalone exercise. This will help determine messaging and design of the statement.
1) Statement design
The total reward statement needs to strike a balance between accuracy and ease of production/maintenance. Ideally, all cash payments the employee receives would be included (to replicate their taxable earnings), while the inclusion of benefits can be determined based upon:
• Their relative value – would you include something worth a few pounds for an employee earning £100k?
• Their prevalence – if only a few employees receive the reward, would you go to the lengths of calculating its value and maintaining it?
• The frequency with which the information changes – if the value could get out of date very quickly, how meaningful is it to provide to employees?
• The ease of access to the information – if the information is not held centrally, but with third parties and is difficult to value or calculate, is it worth the effort?
The key to getting the right elements on the statement is to balance the above considerations.
Once you have the list of items, the next consideration is how to value them:
• For cash, this is relatively straightforward, as you can use what you paid them. The only consideration is the time-period over which you show the values – do you use what has been paid in the last period or what could be earned over the next period?
• For benefits, it can be more complicated, but generally, companies use the cost they paid for the benefit to show its value – for example, insurance premiums or pension contributions. The only issue with this may be getting exactly the right value for employees. If complex to determine – you may consider using an average or estimated value to make sure a benefit can be included.
When you consider the above comments regarding valuation of benefits, it is easy to see why total reward statements are typically launched together with initiatives like flexible benefits, where companies have to get the costs correct to ensure employees are correctly charged for cover.
Apart from that, the biggest considerations for communication are:
• Use of media – do you use online or paper-based communications or both? As with most decisions, this comes down to the business case for one versus the other. Online systems are usually more expensive than paper solutions, but provide better return on investment, because of continuous access, ease of updating/providing real time information and reduced risk of errors.
• Positioning of TRS – timing and messaging are vital to perceived value amongst employees. Producing TRS on an annual basis around pay and bonus reviews can be a great way to reinforce messages around visions, values and performance. It can, however, disengage people that don’t feel they are getting a ‘fair deal’ or aren’t performing as you would like.
This naturally goes hand-in-hand with communication and whether you are using on or offline media. Where systems are involved, you want to make sure they communicate in the right way, to avoid manual manipulation of data. The more frequently you want to update and communicate TRS, the more you need to consider automation of data transfer – something that is a given for flex.