What is a Total Rewards Model, and Why Should You Create One?

You’ve found the perfect candidate to fill your open vacancy and are excited about the new skills, experience, and energy they could bring to your organization. 

But when you slide a job offer across the table to them, they pause for thought. The salary matches what was listed in the job ad, but this is the first time they’ve seen the rest of the deal—the perks, benefits, and incentives that make up your total rewards package. And it’s not quite what they expected. 

This guide outlines the importance of creating a total rewards model, what goes into it, and how to respond if yours falls short of industry standards. 

What is a total rewards system?

A total rewards system refers to the various components of an employee’s compensation package, including their base salary, benefits, bonuses, and other incentives. This system is designed to attract, motivate, and retain employees by providing a comprehensive and holistic package that meets their monetary and non-monetary needs.

What’s included in a total reward model?

The total rewards an employee receives will look different from one employer to another. Typically, we can expect them to fall into the following buckets: compensation, benefits, employee development, employee recognition, and social experiences. 

Compensation 

Compensation is a staple of your total rewards package, encompassing: 

• Base salary: The fixed amount an employee receives for their work.
• Variable pay: This includes bonuses, commissions, and other performance-based incentives.
• Equity or stock options: Some companies offer employees the opportunity to own a stake in the company through equity or stock options as part of their compensation package. 

Employee benefits 

Employee benefits are non-monetary rewards provided by an employer, some of which are mandated by law and others that are voluntary. These can include: 

• Healthcare benefits: Employers can offer various medical insurance options, including health reimbursement arrangements, health savings accounts, and flexible spending accounts. The arrangement will typically cover medical, dental, and vision insurance.
• Retirement benefits: Employers may offer a pension plan or contribute to an employee’s retirement savings through a 401(k) or similar program.
• Paid time off: PTO includes vacation days, sick leave, holidays, and family leave. There’s no federal requirement to offer paid time off for employees, but states like California, New York, New Jersey, Rhode Island, Washington, Massachusetts, Connecticut, Oregon, and Colorado have all implemented paid family and medical leave programs.
• Perks: These are additional benefits that may include gym memberships, company discounts, wellness stipends, commuter benefits, and numerous other perks. 

Employee development 

Providing learning and development opportunities is the top way organizations aim to improve employee retention in their companies, which 93% of employers are concerned about, according to LinkedIn. 

Organizations may entice top talent to join or remain at the company by adding the following to their total rewards programs: 

• Training: These can range from on-the-job learning to specialized workshops and eCourses.
• Career development: Employers may provide professional development stipends, mentorship, coaching, or other career growth opportunities that enable employees to see a promising future within the organization. 
• Tuition reimbursement: Some companies pay back the cost of training following course completion to support employee education and development. 
• Certifications: Employers may cover the cost of certification exams or provide resources for employees to obtain professional certifications. 

Recognition and rewards 

Providing managers, leaders, and peers with a mechanism to exchange praise and gratitude with each other can have a powerful impact on the employee experience. O.C. Tanner’s 2024 Global Culture report highlights that employees using highly integrated recognition programs are 10x more likely to trust the organization and 9x more likely to believe their employer cares about them. 

Organizations can incorporate employee recognition programs into their total rewards strategies by offering the following: 

• Spot bonuses are one-time rewards or points given for a specific achievement or contribution.
• Peer-to-peer recognition programs allow colleagues to give each other rewards, such as tokens or points they can accumulate and exchange for tangible rewards. 
• Employee awards, such as “Employee of the Month” or similar, enable top performers to receive appreciation and a reward for their contribution to the company. 

Social rewards 

Providing collaboration opportunities is inexpensive yet integral to the success of your total rewards model. 69.5% of employees would be happier if they had deeper connections with work colleagues, and that begins by spending time with each other, both inside and outside of their regular roles. Organizations can incorporate social experiences into their total rewards strategies by offering the following:  

• Team building activities such as paid lunches, retreats, and other events promote camaraderie and teamwork.
• Employee resource groups are voluntary, employee-led groups that promote diversity and inclusion in the workplace.
• Volunteer opportunities, such as volunteer events, or provide paid time off for employees to volunteer with their chosen organizations.

Why establish a total rewards model?

A comprehensive total rewards model sets your company apart in a competitive industry, offering the following advantages for your organization: 

1. Attracting and retaining top talent  

If you want to compete for the best people in the market, it all starts with dollars. LinkedIn’s Workplace Learning report lists compensation and benefits as the top factor people consider when looking for a new job. Fall short here, and your big company name or impressive corporate social responsibility record will fade into the background. 

2. Engaging your employees 

Employee engagement improves when individuals feel their employer accommodates their unique needs and preferences. Incorporating flexibility into your total rewards model offers employees a better work-life balance and the ability to build their rewards. For example, they can enjoy: 

• Flexible work arrangements such as remote work or varied hours
• Comprehensive health and wellness programs with coverage for specific conditions 
• Customizable rewards and recognition programs that cater to individual preferences

3. Improving business performance 

With all the puzzle pieces in place, a comprehensive total rewards model can increase employee satisfaction, improving performance and productivity. Employees who are well compensated and have their needs considered and catered for are happier, healthier, and more motivated to contribute to the company’s success. 

On the flip side, employers offering poor total compensation are likely to suffer from high turnover, resulting in skills gaps, overworked teams, and lost productivity. 

Improve your offering with a total rewards analysis

Analyzing your total rewards package will reveal what motivates and resonates with your employees. Are they seeking more money, better healthcare, or greater remote working flexibility? Conduct regular employee surveys to gather feedback on their satisfaction with your current package and host stay and exit interviews to identify any links between total rewards and departure decisions. Using your research, you can: 

Address any missing benefits 

Any gaping holes in your rewards package could be causing a recruitment or retention problem. For example, if you’re failing to offer development opportunities, your employees may head to your competitor that promises more options. Similarly, you may be missing out on a more engaged and connected workforce if you don’t offer a peer-to-peer recognition program. 

Benepass tip: Kickstart your research by reviewing our Benepass Benefits Benchmarking Guide, which provides detailed breakdowns on how companies of different sizes and from different industries build their benefits packages. 

Set up a lifestyle spending account 

Instead of partnering with an endless list of service providers, simplify your rewards package with a lifestyle spending account. As an attractive element of any total rewards plan, an LSA gives employees the power to decide how they want to allocate their rewards, whether toward health and wellness or personal development. 

As an employer, you’ll fund the account, and they’ll have access to various providers at their fingertips. Download our guide on setting up a competitive LSA to dig into all the steps you should take to get started. 

Communicate with your employees 

Your total rewards strategy will only ever be a hit if your employees know that it exists and what it includes. Microadventurer Katya Willems describes: 

“When I worked at the BBC, I had so little idea what I was entitled to in terms of benefits in the 10 years I was there! Such a shame.”

Provide regular communication about your total rewards to ensure your investment is noticed and appreciated. You might use the following to educate your team members: 

• Recruitment and onboarding materials  
• Company newsletters and emails
• Internal channels such as Slack to answer FAQs 
• Internal total rewards champion to provide regular updates

Incorporate Benepass into your total rewards model

Are you ready to overhaul your total rewards package? Benepass offers a range of perks and benefits programs that are irresistible to job seekers and your existing employees—all designed with flexibility in mind. We offer: 

• Pre-tax benefits, including HSAs, FSAs, Commuter Benefits, and Health Reimbursement Arrangements
• Perks programs including wellness, food, professional development, family benefits, LSAs, remote work accounts, and rewards and recognition programs

Book a free Benepass demo today or contact sales@getbenepass.com with any questions.