Pay, benefits, incentives important to employees

Movie stars aren't the only ones who want to be shown the money.

Employees, as well, want more than to be told they're valued by employers.

They want to be shown the evidence -- not just in their base pay, but in all forms of compensation, benefits, perks and other direct and indirect payments.

Pay and benefits represent a significant investment for most organizations, in some cases equaling more than 70 percent of operating costs.

To appreciate the magnitude of their company's investment in people, employees should have a clear understanding of the organization's compensation and benefits program.

It is also critical for employees to understand the organization's overall strategy regarding total rewards. Once employees understand the overall strategy and the organization's goals, they will be more comfortable with their compensation and benefits package.

Total rewards are the monetary and non-monetary return provided to employees in exchange for their time, talents, efforts and results.

Five key elements

It involves the deliberate integration of five key elements that effectively attract, motivate and retain the talent required to achieve desired business results. The five key rewards elements are:

1. Compensation

2. Benefits

3. Work-Life

4. Performance and recognition

5. Development and career opportunities

Total rewards strategy is the art of combining these five elements into tailored packages designed to achieve optimal motivation. For a total rewards strategy to be successful, employees must perceive monetary and non-monetary rewards as valuable.

Compensation is pay provided by an employer to an employee for services rendered. Compensation comprises four core elements:

• Fixed pay or base pay -- This pay is nondiscretionary compensation that does not vary according to performance or results achieved. It usually is determined by the organization's pay philosophy and structure.
• Variable pay is pay that changes directly with the level of performance or results achieved.
• Short-term incentive pay is a form of variable pay and is designed to focus and reward performance over a period of one-year or less.
• Long-term incentive pay is also a form of variable pay and is designed to focus and reward performance over a period longer than one year. Typical forms include stock options, restricted stock, performance shares and cash.

Benefit programs

Benefits are programs that are designed to protect the employee and his/her family from financial risks and can be categorized into the following three elements:

1. Social insurance (e.g. unemployment, workers' compensation, social security).

2. Group insurance (e.g. medical, dental, vision, retirement, life)

3. Pay for time not worked (e.g. vacation, holidays, breaks, uniform changing times).

Work-life matters

Work-life is a set of specific organizational practices, policies, programs plus a philosophy which actively supports efforts to help employees achieve success at both work and home.

There are seven major categories of organizational support for work-life effectiveness in the workplace. These include:

1. Workplace flexibility.

2. Paid and unpaid time off.

3. Health and well-being.

4. Caring for dependents.

5. Financial support.

6. Community involvement and

7. Management involvement/culture change interventions.

Performance

Performance involves the alignment of organizational, team and individual effort toward the achievement of business goals and organizational success.

There are three keys steps that make up performance management:

1. Performance planning.

2. Performance (the manner of demonstrating a skill or capacity)

3. Performance feedback.

Recognition, development

Recognition acknowledges or gives special attention to employee actions, efforts, behavior and performance. Whether formal or informal, recognition programs acknowledge employee contributions immediately after the fact, usually without predetermined goals or performance levels that the employee is expected to achieve.

Development is a set of learning experiences designed to enhance employees' applied skills and competencies.

Career opportunities represents a plan for an employee to advance his or her own career goals and may include advancement into a more responsible position in an organization.

Development and career opportunities include the following:

1. Learning opportunities (e.g. tuition assistance, seminars, on-the-job training, "stretch assignments").

2. Coaching / mentoring (e.g. leadership training, formal or informal mentoring programs) and

3. Advancement opportunities (e.g. internal job postings, succession planning, international assignments).

A well thought out and skillfully implemented rewards program can give your organization a competitive edge. In particular, it can help generate the business outcomes that matter most to your strategy whether those outcomes take the form of employee retention, productivity, job satisfaction or service quality.

In an age of stiffening competition and increasing pressure to do more with less, no organization can afford to ignore the strategic value that a well-designed total rewards system can provide.

Mila Stahl is vice president and principal of the Human Resources Group, a Madison human resources consulting and recruiting firm.