12 Aug Exploring Components of Total Rewards
Exploring Components of Total Rewards
The textbook discusses 5 key areas of a total rewards model identified by WorldatWork (pages 7-11). Review each element and then select any one of the elements and (1) provide a short definition of the element, and (2) describe why the major categories of the element are important for a total rewards package.
6 Everything That Employees Value in the Employment Relationship
The elements represent the toolkit from which an organization chooses to offer and align a value proposition that creates value for both the organization and the employee. An effective total rewards strategy results in satisfi ed, engaged, and productive employees who, in turn, create desired business performance and results.
As defi ned here, the elements are neither mutually exclusive nor intended to represent the ways that companies organize or deploy programs and elements within them. For instance, performance management may be a compensation-function– driven activity, or decentralized in line organizations; it can be managed formally or informally. Likewise, recognition could be considered an element of compensation, benefi ts, and work-life.
The WorldatWork model recognizes that total rewards operates in the context of overall business strategy, organizational culture, and HR strategy. Indeed, a company’s exceptional culture or external brand value may be considered a critical component of the total employment value proposition. The backdrop of the model is a globe, representing the external infl uences on business, such as legal/regulatory issues, cultural infl uences and practices, and competition.
Finally, an important dimension of the model is the “exchange relationship” between the employer and employee. Successful companies realize that productive employees create value for their organizations in return for tangible and intangible value that enriches their lives.
EXPLORING THE KEY AREAS
Following is a brief description of the fi ve elements of the WorldatWork total rewards model. (See Figure 1.4 and Figure 1.5.)
FIGURE 1.3 WorldatWork total rewards model.
Copyright © 2007 John Wiley & Sons
Exploring the Key Areas 7
Total Rewards Component Defi nition Compensation Pay provided by an employer to an employee for services rendered (i.e., time, effort, and skill). Includes both fi xed and variable pay tied to levels of performance. Benefi ts Programs an employer uses to supplement the cash compensation that employees receive. These health, income protection, savings, and retirement programs provide security for employees and their families. Work-Life A specifi c set of organizational practices, policies, and programs plus a philosophy that actively supports efforts to help employees achieve success at both work and home. Performance and Recognition Performance: The alignment of organizational, team, and individual efforts toward the achievement of business goals and organizational success. It includes establishing expectations, skill demonstration, assessment, feedback, and continuous improvement. Recognition: Acknowledges or gives special attention to employee actions, efforts, behavior, or performance. It meets an intrinsic psychological need for appreciation for one’s efforts and can support business strategy by reinforcing certain behaviors (e.g., extraordinary accomplishments) that contribute to organizational success. 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. Awards can be cash or noncash (e.g., verbal recognition, trophies, certifi cates, plaques, dinners, tickets, etc.).
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