Total Rewards System Proposal
Shawn Tillman
Strayer University
HRM533 Total Rewards
Dr. Carla Henryhand
February 19, 2012

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Total Rewards System Proposal More and more companies are realizing they get better performance from engaged and connected employees. Many are rethinking their employee strategies. They are developing new ways to identify, engage and retain the right workforce to deliver the corporate growth agenda. The total rewards strategies these organizations are adopting reflect changes to the nature of work and employee expectations. Employers have recognized that employee engagement affects the bottom line. Where rewards programs needs to be changed, and employers are taking advantage of new technology to access better information to support HR decision making. Total rewards strategy is a plan for allocating reward resources in a manner that directs the business to the successful execution of the company objectives. There are three main factors involved in developing and managing a total rewards plan:
1. A thorough understanding of the total value of all of an organizations rewards elements.
2. Its stated market competitive objectives.
3. The strategic allocation and distribution of money, and the delivery of specific and deliberate expressions to employees about what a company values and their expectations (Manas & Graham, 2003) Alongside these factors there are also three objectives that businesses have to understand when trying to build and develop a successful total rewards system:

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A. Money – This is the “what” dimension, or the elements that are considered to be rewards in the marketplace where companies compete for talent and the competitive levels that need to be established in the marketplaces. This is where rewards and employment contract between the employer and employee total.
B. Mix – This is the “how, who, when, and where” dimension. It determines how program eligibility to total rewards eligibility is established who participates in the plan, and how rewards are delivered. It organizes rewards into the most efficient means of delivery. Money and mix together are the architecture of rewards, and they are used to create the blueprint for developing reward plans (Manas & Graham, 2003)
C. Messages – Messages are the “why” dimension conveying the values and expectations that need to be delivered through rewards. Articulating specific messages allows a company to focus employees on desired business outcomes and the competencies to be successful. The message should define at the highest level how the employer wants their total rewards program to be viewed. The plans statement is very imperative because it purposefully is designed to accomplish how to attract, retain, and motivate employees.
Formulate a Total Rewards Strategy Traditionally compensation programs have had three primary design criteria, this is important especially if companies are to compete globally such as pharmaceutical companies that are international by nature and to be competitive on a global scale need competitive salaries. The three criteria that is important to a global compensation program: Total Rewards System Proposal 4
1. They must be internally equitable, meaning they must pay people in proportion to the relative value of their job.
2. They must be externally competitive, meaning they must pay people in proportion to the market price for their job.
3. They must be personally motivating to employees (Berger, 2007) In today’s world of multi-national organizations and companies, a global impact in total rewards and compensation plans is key to the success of such companies. Pharmaceutical companies such as Pfizer for example have an impact on a global scale on people’s lives. The only way that this is achieved is by having a compensation plan that on a global scale makes the plan more attractive to candidates in the international market to be a success. Organizations add value to their company if their compensation plans can compete for talent on the international market. Often it comes down to a global compensation plan for organizations to attract workers who want to be compensated in a variety of ways by their company (Koo, 2011) Compensation in a braid sense is the perspective that managers must take in the global economy. This is at very heart of a company’s performance. While developing the global compensation and benefit composition, HR must deal with many factors that may or may not be present in developing these types of plans. There are several factors that affect global compensation and benefits:
1. Dealing with diverse standards and costs of living and multiple currencies, exchange rates, tax systems and tax rates. Total Rewards System Proposal 5
2. Complying with local compensation practices, laws and regulations.
3. Accommodating varied employee values and expectations that come from differences in cultures, languages and communication preferences (Armstrong, 2007) In cultural differences as it relates to compensation programs these types of differences would necessitate understanding the value of compensation and benefits programs because a benefit that is highly valued in one country may not be comparatively worthless in another. These differences are often found in that countries beliefs, attitudes and values (Armstrong, 2011) Additionally there are taxation issues that have to be considered as well. Tax regulations vary extensively from country to country. Some countries have no income tax, while others have income tax in excess of 50%. Some benefits that are taxable in one country are not taxable in another country (Armstrong, 2011) also another factor that would need to be considered is the different economic factors. There are many differences from country to country in terms of the influence of politics and power, the distribution of wealth, and the unpredictability of events such as a change in rates of inflation or the net worth of money.
Advantages of Total Rewards Strategy A total rewards strategy is a focused game plan that allocates resources and tailors activities to achieve a target performance. The plan must be unique to the organization and when done effectively will help drive sustainable, competitive advantage in the market for key talent (Hiles, 2009) In any total rewards strategy the objective is to be very specific, state what the company is trying to achieve. It should be measurable, and the company should stick to reward plan Total Rewards System Proposal 6 goals that can be measured like the differentiation in base pay, and costs per employ. With the total rewards approach there are a few advantages that would make the program very successful:
1. Increased Flexibility- A total rewards approach that combines transactional and relational awards offers tremendous flexibility because this allows rewards to be mixed and remixed to meet the different needs of employees. As the importance of flexibility has become more understood, more companies are allowing employees to determine when they work, where the work, and how they work. This is particularly true in a global workforce where workplace diversity and flexibility is the rule and not an exception (Hile, 2009)
2. Improved Recruitment and Retention – The classic initial solution to a recruitment and retention dilemma is to throw money at the problem. A total rewards is critical to addressing the issues created by recruitment and retention. It can help create a work experience that meets the needs of employees, and encourages them to contribute the extra effort addressing areas on how to improve in this area.
Communication to Total Rewards In today’s world, we know that rewards are critical. In fact competitive base pay remains the single most important element in attracting talent to an organization. But many companies may not be fully benefiting from their rewards programs simple because they are not communicating the values of these programs to employees. There are certain elements that need to be effectively communicated to employees:
A. What does their total rewards include and the richness of elements within the total package. Total Rewards System Proposal 7
B. Why employees reward packages are so valuable not just today, but over the long term.
C. How their rewards are (or can be) customized to meet changing needs at various points as the company grows.
D. How employees can make sound decisions and manage the financial risks around reward packages (Black, 2007) Employers use varying methods or methodologies on how they communicate total rewards to their employees. One way is to development a rewards to determine the best way to deliver these messages. For a more automated approach using an online component to communicate the total rewards statement to employees is one way to convey the total rewards message. Research done by the CLC indicates that honest and transparent total rewards statement offer benefits for both employees and employers (Reynolds, 2005) Another good example of how to communicate a total rewards package is the use of the company intranet. This works well because the employee would be able to see the total worth of the package and what they are getting from their employer, and to see how much input they have to the success of their company.
Strategy for Pay Structures Each employee in an organization is paid a salary, and salaries vary greatly, with executives earning as much as or greater than an entry level employees salary. Organizations develop a hierarchy of salaries based upon internal factors, such as current rates and job relationship, and external factors such as labor markets and laws (Eaton, 2006) Total Rewards System Proposal 8 Before establishing a salary structure first there has to be a job structure that shows how compensation and the hierarchy of jobs is in the organization. Then a dollar value will have to be place on the hierarchy. This will come from either the jobs current salary rates or market data collected salary surveys. When going through the job evaluation process the use if benchmark jobs will b e a great tool to use because the market pay levels for benchmark jobs can be arranged from highest to lowest in order to assess the relative value of each job of similar value and to establish the classifications that compose the company’s salary structure (Minnick, 2011)

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References
Berger, D. (2007). Compensation handbook: State of the art. McGaw - Hill Professional.
Black, A. (2007). Total rewards. Benefits and Compensation Digest, 44(11)
Armstrong , M. (2007). Armstrong's handbook of reward management. Kogan Page.
Eaton, J. (2006). Agency, delayed compensation, and the structure. Journal of Finance, 38(5)
Hiles, A. (2009). Tough times demand focus - total rewards strategy. Benefits Quarterly, 25(4)
Koo, R. (2011). The global added value of benefits. Benefits Quarterly, 27(4)
Manas, T., & Graham, M. (2003). Creating a total rewards strategy: A toolkit. Amacom.
Minnick, K. (2011). Pay for performance. Review of Financial Studies, 24(2)
Reynold, L. (2005). Communicating total rewards. Benefits Quarterly, 21(2)