Many organizations continue to rely on printed total compensation statements to convey the value of employment to their team members. However, transitioning to a total rewards system offers a more holistic, dynamic representation of the employer value proposition.

While traditional compensation and benefits statements focus on a narrow scope of employment value, total rewards systems encompass every aspect of the employee experience, including intangible yet highly impactful elements.

By adopting an agile and customizable total rewards system, companies can boost employee engagement, retain high performers, and attract top talent. This guide explores the key advantages of total rewards systems, provides actionable insights for transitioning effectively, and outlines strategies for long-term success.

Here’s what you’ll discover:

  • Key distinctions between Total Compensation and Total Rewards
  • Building a compelling case for Total Rewards
  • Comparing Total Rewards Statements and Systems: What they accomplish
  • Key considerations for implementing a Total Rewards System
  • Ensuring long-term success with Total Rewards

We’ll begin with an overview of how total rewards systems differ from traditional total compensation approaches.

Total Compensation vs. Total Rewards

Total comp and total rewards often get used interchangeably. We’ll take a brief moment to discuss the key differences between the two.

Total Compensation

Many organizations use total compensation to communicate the value of employment to their associates. The problem with using total compensation alone is that it doesn’t communicate the fullest possible value of compensation, because it typically only covers: 

  • Base Pay 
  • Bonuses 
  • Equity 

While total compensation may vary from one company to the next, these are typically the core components that most organizations choose to focus on.

Total Rewards

Total rewards include everything covered by total compensation, such as base pay, bonuses, and equity, while offering even more. A comprehensive total rewards program can also feature health-related benefits like medical, dental, and vision coverage, along with additional employee perks. These may include retirement plans (e.g., 401(k)), legally required benefits like short- and long-term disability, etc.

Total rewards programs can also incorporate your company’s policies, offering a holistic view of all employee benefits and perks. By assigning a tangible value to various offerings—such as commuter benefits, paid time off, and other less visible programs—these systems help quantify the full scope of what your company provides. Sharing this information fosters stronger employee engagement through transparency and consistency.

Speaking of consistency, total rewards strategies and communications offer a more dynamic and ongoing approach compared to total compensation. While total compensation is often communicated annually and focuses on past earnings, total rewards communications with the help of a system provide continuous access to benefits-related information. This shift encourages employees to view their value proposition as a long-term investment rather than a one-time snapshot.

Building the Case for Total Rewards

By now, you’re likely recognizing the many benefits of adopting a total rewards strategy for your organization. Here are a few additional factors to consider:

  • Flexible Levels of Detail: When communicating total rewards, you can tailor the level of detail to suit your audience. For example, you might highlight specific contributions like the employer covering 90% of medical insurance costs while employees pay only 10%, showcasing the value your company provides. However, it’s important to balance detail with simplicity—focusing on clear, broader concepts ensures the message is accessible and impactful.
  • Engaging Employees and Their Families: By offering a portal that employees can access from anywhere, you create an opportunity for their families to learn about total rewards as well. This can foster greater appreciation not only from your employees but also from their significant others, reinforcing loyalty and satisfaction.
  • A Competitive Edge for Recruiting Top Talent: In a competitive hiring market, top talent is often weighing multiple offers. Presenting a comprehensive value proposition—beyond just a compensation package—can set your organization apart. Highlighting the full spectrum of rewards can make you their top choice and increase retention once they’re on board.

The Purpose of Total Reward Statements

A total rewards statement is typically shared with employees on an annual basis, offering a detailed breakdown of their compensation, benefits, and additional perks. When implementing a total rewards strategy, you can choose to provide standalone statements, combine them with an online portal for real-time access to benefits information, or forgo the statements entirely in favor of using just a portal.

Benefits of Total Rewards Statements

  • Boosts Employee Engagement: Helps employees better understand and appreciate the value of their rewards.
  • Improves Retention: Reduces voluntary turnover by reinforcing the overall value provided.
  • Supports Employee Families: To a degree, statements can involve families in understanding benefits.
  • Enhances Communication: Offering any type of comprehensive rewards statement is better than providing no information at all.

Challenges of Total Rewards Statements

  • Administrative Burden: Preparing annual statements can be a time-consuming and resource-intensive process, often increasing support costs for HR.
  • High Costs: Producing annual statements can be expensive, with some organizations spending thousands every year.
  • Lacks Forward-Looking Value: Statements only reflect past compensation and benefits, making them outdated as soon as they’re issued.

When deciding whether to use total rewards statements, consider the balance between their potential to enhance engagement and retention and the cost and effort involved in their preparation. For some organizations, pairing a statement with an accessible, forward-looking portal may be the ideal solution.

Advantages of Utilizing a Total Rewards System

Unlike employee benefit statements, total reward systems are not just a once-yearly event. Instead, they take a continuous approach. Thus, they achieve the same advantages of statements:

  • Increased Employee Engagement
  • Fewer Voluntary Quits
  • Increased Retention
  • Engage Employees’ Families

As mentioned earlier, a total rewards system has the ability to better engage employees’ family members, who may be interested in learning more about benefits and taking advantage of the ones that are extended to them. Additionally, here are some of the other advantages that total rewards system have over using statements alone:

  • One-Time HR Project: Instead of spending months preparing for statements every single year, your HR team will only have to prepare for the roll-out of your total rewards system one time. From there, staff members can make updates as needed, but it’s a matter of simply configuring certain elements – not redesigning an entire system. The result is that HR will have significantly more time to focus on other priorities.
  • Less Expensive: Because a system only requires legwork from HR upfront, it quickly becomes much less expensive than total rewards statements, which require a great deal of work every single year.
  • Updated Regularly: Making changes is simple with a configurable total rewards solution, and the information presented is timely and relevant, instead of outdated.
  • Access to Powerful Analytics: Should you wish to, you can even incorporate predictive analytics for your employees, such as walkaway value, prospective 401(k) growth, and estimations of what their total rewards package could look like in three to four years. This will get your employees thinking about the long-term prospects of working for your company, which is ideal for driving retention.

Making a Total Rewards System Work for You

Rolling out a total rewards system will require the brunt of the work in the beginning, but making it work for your organization in the long run depends on three important factors:

  1. Starting With a Purpose: Total rewards systems provide many advantages, but narrowing your focus on one or two key outcomes from the get go will give you and the rest of the team members involved a clear direction. For instance, your main goal might be to reduce turnover. Oftentimes, the purpose that companies choose intends to solve their biggest pain point.
  2. Frequency: Total rewards systems are preferable to offering benefits statements alone because they aren’t outdated, and instead take an ongoing approach to rewards communications. With that said, to ease yourself into a total rewards system, you may want to focus on making updates only quarterly, and then increase frequency from there.
  3. Connecting to Core Values: Offering a total rewards system to employees organically enhances transparency. It can also act as a means of upholding any other core values your company may have, because you can use strategic branding to incorporate them.

Conclusion

Overall, it’s clear that total rewards present a better value proposition than total compensation alone. There are many advantages to total rewards, which we’ve discussed in detail here. To review quickly, here are a few of the key concepts:

  • Total Compensation vs. Total Rewards: While total compensation only focuses on base pay, bonuses, and equity, total rewards also encompass benefits, perks, and company policies for a complete value proposition.
  • The Benefits of Total Rewards: Total rewards systems can be as broad or detailed as you’d like them to be, and they create a stronger connection with employees’ families. They are also better for attracting top talent.
  • Total Rewards Statements vs. Total Rewards Systems: Whereas statements are an annual event, systems are continuous and always available to the employee. They reduce HR support costs, drive engagement, and make it even easier for families to access benefits-related information.
  • Considerations: When choosing to implement a total rewards system, be sure to think about your company size, audience differentiation, content, features, and vendors.
  • Making It Work Long-Term: For the best results, start slowly with a total rewards system and then progress to more frequent updates as your associates become familiar with it. Have a clear objective in mind from the start, and consider how you can inject company values into your system as well.

Ultimately, implementing a total rewards system is an employer’s best option for maximizing employee value propositions, and it offers many additional long-term advantages as well, such as a more engaged workforce and better retention.

HRSoft’s Total Rewards Communication solution empowers organizations with real-time, personalized total rewards statements that provide ongoing visibility into compensation, benefits, and more. Take a short self-guided product tour here.