skip to main content
Get Your Money's Worth From Your Total Rewards Package

Get Your Money's Worth From Your Total Rewards Package

by Scott DeKoster and Jennifer Robison

Story Highlights

  • Rethink base pay, incentive pay, perks and benefits
  • Don't overlook culture when reviewing your total rewards package
  • Factor for employee engagement and wellbeing in total rewards analyses

A down economy is forcing organizations to make massive spending cuts, and total rewards packages are under scrutiny.

Total rewards packages can sway a job seeker but after that, they're just payroll costs -- and payroll accounts for 15% to 50% of a company's revenue.

Moreover, total rewards programs often include arbitrary quantity and cost considerations that are heavily influenced by manager and company preferences and collective cognitive biases (e.g., education benefits have a higher return vs. commuting benefits right now, as education is increasing economic mobility). Gallup research shows it happens all the time.

You can reformat your total rewards to improve business results and truly reward employees -- but it's not as simple as totaling up employee preferences, usage and compensation costs.

Leaders need to know how every line item in the package relates to employee performance, organizational resiliency, and human capital risk. This process should involve a full 360-degree review of satisfaction rates, employee understanding, Conjoint analysis, internal qualitative analysis and an external competitive view that covers the cultural constructs -- values, stakeholders and people management -- that are too rarely included in benefits analyses.

A Truly Rewarding Rewards Package

One of those line items under review needs to be employee engagement. Gallup's research shows employees who are not engaged cost 18% as a percentage of their salary over engaged employees.

If your company does not scientifically measure engagement and doesn't optimize your wellbeing program to increase it, you could be losing hundreds of millions of dollars in productivity value.

Here's how to fix that and design a truly rewarding total rewards package.

First, triage. Wellbeing has been dropping since the pandemic started, which threatens people and productivity now and companies' long-term resiliency as well.

So, before anything else, leaders should focus on upskilling all managers' capabilities to improve employee wellbeing, reduce burnout and regain productivity.

Orient these efforts to a remote work environment -- early in the pandemic, Gallup noted that the percentage of remote workers doubled and odds are many will stay remote.

Examine your values and how they intersect with what matters to your culture, employees and customers. Total rewards should support the organizational value system and aspirational business outcomes, but more than half of employees don't strongly agree that they "know what their company stands for."

Wellbeing is a value that does improve performance and can support purpose -- in some companies, it's fundamental to purpose -- but leaders must understand their current cultural climate to improve it.

It's equally important to know what employees value about wellbeing -- particularly your top performers -- with validated, predictive benchmarking.

If your company does not scientifically measure engagement and doesn't optimize your wellbeing program to increase it, you could be losing hundreds of millions of dollars in productivity value.

That will demonstrate the complexities and interdependencies of key attributes across roles, locations, etc. It will also indicate the pain points that affect employee wellbeing.

Gallup strongly recommends using validated predictive analytics to calculate, benchmark, map, track, improve and/or and mitigate wellbeing and productivity by highest risk roles, teams, business units, etc.

Talk to stakeholders. Discuss what is "in" and what is "out" moving forward with internal constituencies.

Getting upfront stakeholder buy-in helps them understand the variables and attributes that are important to the organization's strategy and business continuity plans. And leaders' transparency enables stakeholders to communicate to their direct reports how wellbeing supports the organization.

Those managers will need that information when they explain accountability for wellbeing to downstream managers.

Include wellbeing in management practices. Optimizing long-term productivity, increasing organizational resiliency and lowering human capital risk are best operationalized by managers, Gallup finds.

Their proximity to individual employees allows managers to make wellbeing part of the day-to-day and their frequent conversations are opportunities to head off problems.

And people managers who have been developed with proven interventions can typically handle larger spans of control, allowing scale and cost savings while lowering risks associated with wellbeing and productivity.

Neutral is not good enough.

And now is the time to do it.

Remote work offers unprecedented opportunities for changes to total rewards packages, but employees' perceptions of their value, and often of their own wellbeing, have changed. GDP is also dropping like a rock -- down 4.8% in Q1 2020, the largest quarterly decrease since the Great Recession -- and a lot of P&L sheets show it.

Optimizing total rewards requires a different mindset about benefits, but leaders should think about it this way: Using benefits as basic compensation returns exactly as much value to the business as paying its people.

In fact, there's no difference at all. Consider all the companies that only offer the benefits they're legally required to and give higher pay in lieu of perks.

That strategy doesn't improve employee performance -- though it does save HR some hassle -- because benefits as a form of compensation are transactional and impact-neutral.

Wellbeing is not neutral. Indeed, wellbeing influences many measures of success, and they compound each other. For starters:

  • Wellbeing is closely associated with engagement, and companies with highly engaged employees have 147% higher earnings per share.
  • "Greater work-life balance and better personal wellbeing," is the second most important job attribute to high-talent employees. "The opportunity to do what I do best," is No. 1, and companies that intentionally develop employees' strengths have higher wellbeing.
  • Highly engaged employees with high wellbeing miss 70% fewer workdays because of poor health annually, are 45% more likely to report high levels of adaptability in the presence of change, and are 59% less likely to look for a job with a different organization in the next 12 months.

Some of those measures are cost saving, some generate revenue, but none are neutral. And reframing total rewards as a vehicle of wellbeing allows companies to reclaim a great deal of the 18% loss in salary cost.

So, as leaders make their cost cutting plans, they should evaluate the impact of wellbeing on revenue -- and make sure their benefits packages bring all the ROI they can.


Scott DeKoster is a Senior Managing Consultant at Gallup.

Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A
+1 202.715.3030