What is a total rewards model?

Written by: Chase Charaba
Published on January 4, 2023.

If your small business struggles to attract and retain top talent, you might be tempted to offer a more competitive salary. While higher compensation can help, many factors influence whether a job candidate will apply to work at your organization or if a current employee will stay.

A total rewards program can help your organization create employee loyalty, improve employee satisfaction, and boost employee engagement.

This article will explain what a total rewards program is, what elements are involved with rewards strategies, and how you can set up total rewards at your organization.

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What is a total rewards strategy?

Employee total rewards is a recruitment and retention strategy that focuses on providing and improving direct, indirect, and non-monetary compensation.

Many traditional employee benefits packages focus on total compensation. With this business strategy, organizations offer their employees competitive salaries, bonuses, commissions, and other financial benefits. However, total compensation methods don’t focus on non-monetary employee benefits and perks.

An organization can also offer indirect compensation such as health insurance or wellness benefits. While indirect compensation methods come closer to a total rewards strategy, the method still needs a few elements.

What are the elements of a total rewards system?

There are many factors to consider when implementing a total rewards package at your organization. You’ll want to offer a mix of traditional compensation, employee benefits, and non-monetary perks.


The first element of any total rewards program is compensation. In addition to a competitive salary or hourly wage, you can offer rewards that motivate employees.

Compensation ideas include:

  • Variable pay for achieving personal and business goals
  • Cash bonuses
  • Gift cards for special occasions

Employee benefits

The second element of a total rewards program is employee benefits. You’ll find attracting and retaining employees more challenging without a robust benefits package.

Traditional benefits to offer as part of a total rewards system include:

  • Health benefits such as traditional group health insurance
  • Dental and vision insurance
  • Retirement plans such as 401(k)s
  • Paid time off (PTO)
  • Employee stock options
  • Life insurance
  • Disability insurance

Non-traditional perks you can offer in your benefits package include:

  • Personalized health and wellness benefits
  • Employee recognition
  • Flexible work arrangements, such as remote work
  • Flexible work schedules
  • Commuter benefits
  • Education benefits such as tuition assistance

Companies that offer total rewards generally compile their benefits and perks information and share it with their employees and job candidates.

Employee development programs

One of the best ways to reward loyal employees and boost employee retention efforts is by offering professional development opportunities.

This can include helping employees develop new skills, hosting training and seminars, and paying for some of an employee’s tuition. Your employees will see the value in these programs, encouraging them to stay with your organization. This is especially true if you allow your employees to move up within the organization based on the skills they learn.

Employee recognition

Finally, employee recognition is essential for a successful total rewards model. Your recognition of employees’ hard work should go beyond free goodies. One way to honor the contributions of your employees in a meaningful way is by giving out individual awards or titles. This can include an employee of the month or quarter, achievement awards, and more.

Promoting your employees is also a great way to recognize their accomplishments.

Why implement total rewards strategies?

Establishing a total rewards model for compensation and benefits is essential for attracting, retaining, and engaging talented employees who are in high demand, especially in a tight labor market.

Attract job candidates

Sharing your total rewards in job posts will make your open positions stand out to prospective employees. When candidates can see all of the perks you offer, they’ll be able to make a more informed decision about if they want to work at your organization.

Offering a competitive salary alone isn’t enough to attract highly specialized talent. Our 2022 Employee Benefits Survey Report found that 82% of employees believe the benefits package an employer offers is an important factor in whether or not they accept a job offer.

By highlighting all of your benefits and perks, you’ll be able to attract candidates better.

Reduce employee turnover

Offering the benefits, perks, and support your employees need can help you retain your current employees for longer, helping to reduce turnover rates. Offering various benefits and educating your employees on them can help you increase job satisfaction.

Employees who feel supported and cared for will be likelier to stick around.

Improve employee engagement

Offering a variety of benefits and perks can also help you improve employee performance. When your employees feel taken care of and appreciated by your organization, they’ll be more likely to work toward achieving your goals. This highly engaged workforce contributes to a positive work environment and improved morale.

Employee engagement also leads to increased business performance because your employees will be more likely to focus on organizational goals.

One way to improve engagement further is by calculating and reporting your total rewards to employees. This way, employees can see the value your current benefits plan provides.

Why calculate your total rewards package?

When organizations implement total rewards strategies, they do so with the hope that employees will recognize the value they get by working at the company. One way to ensure your employees know which perks are available is by calculating your employee total rewards and including them on offer letters and in annual performance reviews.

Calculating your total rewards package helps employees better understand the programs, benefits, and perks you provide. This contributes to a more extensive utilization of your benefits. It also gives them a better understanding of the internal processes your human resources department has set up to support them and improve their employee experience.

How to implement a successful total rewards program

If you’re ready to implement a total rewards program at your organization, there are a few things you’ll need to consider.

1. Choose the right benefits and perks for your employees

When selecting which benefits and perks to offer your employees, you should provide the perks your employees want. A great place to start is by surveying your employees to determine which perks they care about the most. You can also research some of the most common benefits for your industry and region.

Our 2022 Employee Benefits Survey Report found that the benefits employees want most are:

  • Health benefits such as health insurance
  • Paid time off (PTO)
  • Retirement savings plans
  • A flexible work schedule
  • Dental insurance
  • Paid family leave
  • Mental health benefits
  • Vision insurance
  • Professional development

Health benefits were the most popular benefit among organizations surveyed, with 92% of employers offering it and 87% of employees saying they value it.

Due to rising costs, many small businesses find it challenging to offer traditional group health insurance to employees. Thankfully, quality alternatives such as health reimbursement arrangements (HRAs) exist.

An HRA enables you to offer a fixed, monthly allowance to your employees to cover qualifying medical expenses tax-free. This gives employees more freedom over their health benefits, and grants you more cost control than you would get with traditional group health insurance.

Three of the most popular types of HRAs are the:

  • Qualified small employer HRA (QSEHRA)
    • An HRA designed specifically for small employers with fewer than 50 full-time equivalent employees (FTEs)
  • Individual coverage HRA (ICHRA)
    • An excellent health benefits option for organizations of all sizes
  • Group coverage HRA (GCHRA), also known as an integrated HRA
    • Pairs with your existing group health insurance policy to extend your benefits

If you want to empower your employees through your benefits package, employee stipends can help. With a stipend, you can offer your employees a monthly allowance for various expenses.

For example, you can offer a wellness stipend to your employees to reimburse them for their gym memberships, wellness mobile apps, and other expenses up to the allowance cap you set.

This gives your employees more flexibility with their benefits instead of forcing them into a one-size fits all benefits program. With stipends, you can offer allowances for expenses such as health and wellness costs, home office set-up costs, cell phone reimbursement, commuter benefits, and more.

2. Provide flexibility with your rewards

Much like personalized benefits, your employees’ other rewards and perks should reflect the increasing need for workplace flexibility. Your employees’ wants, needs, and lifestyles change over time, as does your organization. The best total rewards are ones that are customized for each individual.

With flexible rewards, you can better respond to any changes and give your employees the freedom they want without making benefits administration difficult.

3. Keep up with trends

A tight labor market can rapidly change employee benefits and recognition trends. Instead of focusing on the same perks and opportunities you always have, keep an eye on your competitors and your industry. Be sure to conduct regular market research on benefits and compensation to avoid losing your employees.

4. Seek employee feedback

When offering rewards to your employees, you’ll want to evaluate the success of your program. After all, if your employees can’t find value in your total rewards, your program won’t improve retention.

To evaluate your strategy’s success, ask eligible employees for feedback. Based on their feedback, you can change the types of rewards and opportunities you offer. You can also measure your strategy's success by looking at how employee turnover rates have changed since implementing your program.


Today’s workers want more than a yearly salary increase. Organizations need to reward employees for their hard work to retain them. By implementing a holistic approach to rewards, you can create a more engaged workforce and improve employee retention rates.

One of the most critical elements of total rewards is offering flexible benefits. With PeopleKeep’s personalized benefits administration software, you can easily set up and manage your HRAs and employee stipends in minutes each month.

Schedule a call with a personalized benefits advisor to see how personalized benefits can support your total rewards strategy

Originally published on January 4, 2023. Last updated January 4, 2023.


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