What Does Total Rewards Actually Mean and What Does It Include?

When most people think about pay, they focus solely on salary. However, total rewards—a broader concept in compensation—are becoming more important for both employees and employers. The modern workforce is catching on to the significance of total rewards and the value it brings beyond just a paycheck.

Total rewards encompass everything an employee receives from their employer, including direct compensation like base salary, and indirect benefits such as healthcare, bonuses, and even long-term incentives like equity. It’s an industry term that reflects the full value an employee gets from their job, not just the immediate monetary aspects.

Why Talk About Total Rewards When People Care Most About Salary?

At first glance, it may seem like salary is the only thing that matters—and there’s no denying that a fair salary is very important—but total rewards offer a more complete picture of compensation. Here’s why:

1. Diverse Types of Compensation: Total rewards include various forms of compensation. Some, like base salary, are immediate, while others—like equity—are designed for the long term. Benefits, like healthcare, are focused on improving employees' quality of life, and performance incentives, like bonuses, motivate employees to reach higher levels of achievement.
2. Aligning with Organizational Goals: By offering different types of compensation, businesses can tailor their rewards to meet both organizational objectives and employee needs. This flexibility helps attract the right talent and ensures employees are motivated to achieve company goals.
3. Customization for Employee Preferences: While cash is essential, not all employees value it the same way. Some might prioritize great healthcare benefits, while others may focus on a strong commission structure or stock options. Total rewards allow companies to offer a variety of incentives that appeal to a diverse workforce.
4. Employee Engagement: Total rewards also provide a way to align employees’ personal goals with business objectives. For example, offering equity can encourage employees to think long-term about the company’s success, while bonuses tied to performance goals drive short-term results.

Communication is Key

Like all aspects of compensation, effective communication is essential to a successful total rewards strategy. Here’s how to ensure your total rewards program works for both your organization and your employees:

1. Align with Your Compensation Philosophy: Your total rewards strategy should be rooted in your company’s overall compensation philosophy. Whether your focus is on base salary, performance bonuses, or long-term incentives, you should always be able to explain the “why” behind your approach with company-level objectives.
2. Empower Your Managers: Managers play a crucial role in communicating total rewards to their teams. Ensure they are well-versed in your organization’s compensation packages so they can explain the full value of what employees receive. This important for recruiting, onboarding, and review and merit cycle conversations.
3. Provide Visibility for Employees: Employees need to understand their total rewards package fully. Regularly communicating the total value of their compensation—including salary, benefits, and other incentives—can increase engagement and satisfaction. CandorIQ has great tools to ease the burden here, learn more about our Candidate Offer Experience and Employee Total Rewards Platform.

Need Help with Your Total Rewards?

At CandorIQ, we specialize in helping businesses create transparent and comprehensive total rewards strategies that attract and retain top talent. Let us help you navigate the complexities of compensation and ensure your employees understand the full value of what they receive. Book a demo to learn more about what we can do for you.