Total reward statements are the weapon of choice for reward and benefits professionals who want to spell out the value of employees’ reward packages. But all too often they’re not up to the job. David Rowley asked four experts what they would do to make the most of total reward statements.
Employees can often act like Philistines when it comes to the real value of the benefits they receive.
A job that pays a few thousand more will often lure them away, regardless of the generosity of the pension and incentives they currently receive.
In the worst-case scenario, employees may even ignore the total reward statement that is sent to them in an effort to keep them.
As total reward statements are relatively new it is clear that best practice in this area will evolve, that increasing numbers of employees will become familiar with the concept of total reward, and that attitudes will change.
However, employers should watch out for:
- lack of pre-total reward statement communication – tell employees their total reward statement is being delivered
- using data that is poor and thus undermines total reward statements’ accuracy
- putting statements out on poor quality paper
- using out-of-date information
- not having sufficient resources in place to deal with employee total reward statement queries
- not including non-financial benefits.
Many of the early prototypes of total reward statements have been much refined and have become quite slick and powerful HR tools.
Q What are the essentials of a comprehensive total reward statement?
Jim Christopher: It will always include the cash benefits provided, but also details additional benefits an employee may take for granted (such as health and retirement benefits, share-related plans, development and career, plus work-lifestyle arrangements). Target the communication effectively so that it provides the information employees need to be able to make informed decisions in the future.
Jon Pearce: Personalisation is key. The statement must be addressed to the individual and detail the benefits to which they are entitled and the options they have. Of course, the information must be presented clearly, without recourse to jargon, to allow the member to make informed decisions about their choices.
Richard Morgan: All elements of fixed and variable pay, pensions, other benefits (cars, life assurance, private medical insurance) and share schemes. The main constraint is usually the availability of accurate data. Many total reward statements extend into HR policy for items that can’t be valued in financial terms, such as sick pay, maternity and paternity leave, training, car parking and on-site cafeteria.
Charlie Carrick: Telling staff how much they earned and what their benefits costs were is vital, but companies should also take the opportunity to tell their employees about all of the other tangible and intangible benefits of working for them. Free fruit/football/fun might not have a cost attributable to each employee, but it has a value – so tell people about it.
Q What formats are the most or least effective?
Christopher: The format for delivery of a total reward statement is dependent on the audience and how the company currently communicates with employees. There’s no point using an online system if only a few staff have access to the internet. Likewise, if the company communicates largely through e-media, then paper may not be the best approach. The business objectives also need to be taken into account. Are other online applications likely to be launched in the future? If yes, what?
Pearce: Traditionally, total reward statements, where only sent to the top people in the company, have been printed on special paper, bound in expensive materials, to convey the idea that the statement is detailing benefits that are really top quality and exclusive. This certainly grabs the attention. But there is a case for total reward statements being issued to all employees who have a wide-ranging reward package. A short booklet detailing the benefits might be more appropriate.
Morgan: The vast majority of Vebnet’s clients refresh the data on an annual basis, often in the run-up to the annual flexible benefits renewal. However, so long as the data is available, the total reward statement can effectively be refreshed in ‘real time’. Clearly this is much easier to do online than with paper, so most companies that produce a paper total reward statement will do so on an annual basis, often coinciding with pay and/or bonus reviews.
Carrick: Huge great tomes thudding through the letterbox based on data from three months ago loses impact straight after the crash in the hallway. Keep the numbers up to date; if paper is used, get the statements out swiftly, or use technology; online delivery is instant, real-time and individually configurable to allow employees to interact with the information, understand the rewards available and actually get the message.
Q What can technology do for total reward statements?
Christopher: Technology has enabled organisations to become much more flexible and creative in how they communicate. Paper is no longer the only option. We can now use the data we hold on employees and begin targeting not just the content, but also the way the information is passed between both the company and its employees. Communication with employees is now becoming a truly multi-media experience.
Pearce: An interactive PDF can allow an employee to access information only if they need it – rollovers or pop-ups can explain technical terms or covering notes on benefits; active links can help employees explore other sources of information to help them make decisions about the value of benefits. There is scope for interactive modellers – helping the employee understand the relative value of components of the package and what impact their choices may have on the package.
Morgan: Technology opens up a range of options for employers to make the total reward statement far more interesting. One of the main advantages of delivering them online is that more comprehensive information can be made available. The statement can look clean and uncluttered, and technology will allow employees to click through to more detail if they require it. Online statements are also much less costly, kinder to the environment, quicker to deploy, and easier to keep up to date.
Carrick: Technology is a great enabler – employers can get different messages to different groups of employees at the push of a button, using all forms of technology; internet, SMS, web casts, etc. Work out the profiles of your employees and communicate in a way that resonates best with each group. Never assume what works for you, works for all. Making it easy for people to engage will increase the value perception by employees and the actual return for the company.
Q What possible reasons are there for not doing total reward statements (many big employers do not)?
Christopher: Many organisations don’t supply total reward statements due to time, cost and resource constraints. They can take time to get up and running and the quality of the data is crucial. If a large organisation has made a number of acquisitions and the divisions of the company use different benefit structures, HR and payroll systems etc, obtaining and validating data will take time. If there is limited confidence in the data the company may not want to issue a total reward statement, rather than send out incorrect information.
Pearce: Where the package of benefits is a flex scheme, administered by a number of outside suppliers – for example, the pension scheme dealt with by one company, childcare vouchers by another, elements controlled by the HR department, etc – it may be quite difficult to pull the various strands together into one, united statement. Similarly, if the range of benefits is large, or the number of categories within the benefit structure big, the employer may simply see it as just too problematic.
Morgan: Some employers do not produce a total reward statement because they think employees get very little beyond their basic pay – either because the benefits package is basic or because take-up rates are low. In the case of low take-up rates, there is in fact an opportunity to promote what is available. Otherwise, the financial or employee relations environment may mean that launching a total reward statement would be insensitive.
Carrick: If the additional rewards for employees are not worth writing home about, most employers won’t publicise them. It doesn’t mean that there shouldn’t be a total reward statement strategy in place, even if the data is only available at HR and finance levels. By having instant access to reward data, profiled down to individual employee level, employers can manage reward costs more effectively, plan reward strategy, model merger and acquisition costs and provide total reward statements as required.
How it adds up
- Employers rank a lack of appreciation of staff benefits as their second biggest benefits problem, second only to the cost of meeting final salary pension scheme liabilities. Source: Vebnet 2009 reward survey
- Seven out of 10 respondents to a 2009 Thomsons survey said their employees do not know the full value of their total reward package. But, almost the same percentage, 70.02%, do not offer total reward statements to their employees. Of those that do, 17.6% offer web-based total reward statements, while 12.32% put them on paper. Of those that do not offer total reward statements, 37.78% said they plan to do so, and 32.24% do not. Source: Thomsons Online Benefits employee rewards watch survey 200, 523 organisations surveyed
The Centrica way
Centrica distributes statements after any key event that might change the value of individual benefits. So, Centrica updated its total reward statements after its recent rights issue.
It uses two types of statements. One is for employees who have access to long-term incentive plans. These allow instant access to check on the value of their reward. A second system is being considered for employees who tend to be remunerated only through pay, benefits and tactical incentive schemes.
After an initial launch in 2007 of statements on paper, Centrica has now switched to online statements that allow them to measure how many employees are accessing them.
Craig Truter, reward manager Centrica