In today’s competitive market, a well-designed total rewards strategy can transform how your business approaches talent acquisition and retention. If you’re finding it challenging to attract and keep top talent, you are not alone. Eighty-nine percent of US small businesses report facing hurdles when it comes to finding qualified new hires. That’s where a total rewards strategy comes in.
What you’ll learn
What you’ll learn
Updated: May 27, 2025
Key takeaways
- A total rewards strategy consists of monetary and non-monetary employee perks
- The main components of the strategy are compensation, benefits, work-life balance, career development, and recognition
- Launching a total rewards strategy can improve talent retention, boost engagement, and enhance employee well-being
- When setting up a rewards program, consider employee preferences, labor laws, and business objectives
This approach goes beyond traditional compensation to support employees more comprehensively: financially, socially, mentally, professionally, and more. But what if this is the first time you’ve come across this strategy? In this guide, we’ll cover what a total rewards strategy is, share examples of what they consist of, and how some companies implement them.
What is a total rewards strategy?
A total rewards strategy is a compensation and benefits system that offers perks such as financial rewards, well-being, and career development. In other words, a total rewards strategy considers what attracts and motivates employees beyond a paycheck. It combines direct (monetary) and indirect compensation.
The difference between traditional compensation and total rewards
Typically, conventional compensation centers around standard pay structures, including wages, bonuses, and benefits such as health insurance. It often fails to consider an employee’s holistic needs or preferences.
To create a package that resonates with employees’ needs, a total rewards compensation strategy combines financial compensation, work-life balance, career development, recognition, and more to create a package that resonates with employees’ needs.
But how exactly do total rewards align with business objectives? A well-rounded total rewards strategy makes employees feel valued, motivated, and connected to the company’s goals.
Because the total rewards approach supports the well-being of employees, it boosts productivity by enabling your staff to focus on their work instead of worrying about unmet workplace needs. Offering employee benefits improves job satisfaction. The higher the job satisfaction, the more loyal people are to their employers.
Now that we understand the basics, let’s cover some of the common characteristics a total rewards methodology consists of.
Key components of a total rewards strategy
A successful total rewards strategy includes five core elements, each working together to offer a complete employee experience.
Compensation
This includes all monetary rewards:
- Salaries and hourly wages
- Performance-based incentives (bonuses, commissions)
- Profit sharing or stock options
Benefits
Benefits are non-monetary perks that contribute to an employee’s overall well-being. Some of the most-wanted benefits are:
- Health, dental, and vision insurance
- Paid time off (PTO), sick leave, and parental leave
- Retirement plans, such as 401(k) matching
Work-life balance
Employees value organizations that support them on a personal level. To achieve that offer:
- Flexible work hours or remote work options
- Paid family leave
- Policies supporting mental health
Career development
Providing opportunities for growth and learning shows employees that they’re valued and essential to the company’s future. Examples include:
- Promotion
- Role-based training
- Tuition reimbursement
Recognition and rewards
Acknowledging and rewarding employees’ efforts promotes a sense of accomplishment and belonging. Examples of recognition include:
- Employee of the month awards
- Celebrating work anniversaries
- Peer-to-peer recognition programs
Now that we have the pieces of the puzzle, how do employers determine if the strategy will make the impact they’re hoping for?
Why a total rewards strategy matters
If you’re wondering whether investing time and resources into a total rewards strategy is worth it, here are four key reasons why it matters for your business.
Attracts and retains talent
Top candidates don’t just look for competitive salaries — they want an employer who recognizes their personal and professional needs. According to Gallup, nearly 60% of US workers say that better personal well-being and greater work-life balance are top of mind when evaluating a job offer. When employees thrive in their personal and professional lives, they’re 32% less likely to seek another job.
A robust rewards strategy shows job seekers that you support employees socially, mentally, physically, and in any other aspects that influence their well-being. This can help you attract high-performing talent and reduce turnover rates.
Boosts employee engagement and productivity
Total rewards support employees’ overall well-being. And today, well-being isn’t just an expectation — it’s the key to improved employee performance. Research says that when workers feel their organization cares about their overall wellness, they are:
- 4.4 times as likely to be engaged at work
- 73% less likely to feel burned out
- 53% less likely to hunt for a new job
- Seven times more likely to recommend their company as a great place to work
Enhances overall employee well-being
A comprehensive total rewards strategy addresses an employee’s physical, professional, financial, social, and mental needs. All these are the core elements of overall employee well-being.
As an employer, you may ask whether it’s your position to influence employee well-being. After all, isn’t that a personal matter? But helping workers prosper in all aspects of their lives is the right thing to do. It makes good business sense, too.
For example, Forbes says that investing in employees’ physical well-being lowers healthcare costs, reduces absenteeism, and increases retention. Helping them stay mentally healthy makes staff more capable of concentrating on their job and giving their best at work.
A rewards strategy has many positives. To enjoy the advantages, your employee assistance program must be tailored to your organization’s needs. Next, let’s learn more about structuring one.
How to design and implement a total rewards strategy
Here are some best practices employers follow when adding this type of program to an organization.
1. Assess employee needs and preferences
When designing your total rewards offerings, you need to identify what benefits your staff prefers.
To understand what your employees value most, conduct surveys, focus groups, or one-on-one discussions. Also, an open-door policy can help you collect employee suggestions and understand their needs.
2. Align rewards with business objectives
If your employee perks don’t lead to your business goals, they’re just expensive benefits with no real impact. A solid total rewards strategy should help you achieve your objective, whether it’s boosting performance, improving retention, or promoting innovation.
3. Comply with labor laws
A well-designed total rewards program follows all applicable labor laws. For example, family and medical leave, workers’ compensation, Medicare, unemployment insurance, and Social Security are examples of legally required benefits.
Federal regulations to consider when setting up or launching your total rewards plan include:
Consult a legal professional to confirm all the federal regulations your rewards program must comply with. Check whether your state has additional laws that may affect your total rewards strategy.
4. Effectively communicate your total rewards packages
For your total rewards program to have the impact you want it to, make sure that employees understand what they have access to. You can communicate the program’s components through an employee handbook, team meeting, or internal portal.
5. Measure and adjust the strategy
Regularly review metrics like employee satisfaction, retention rates, and productivity levels to evaluate the success of your plan. Adjust your total rewards program based on these key performance indicators. To tailor your rewards strategy to their preferences over time, collect employee feedback regarding the program and monitor their changing needs.
Examples of total rewards programs
Here are a few examples of total rewards programs you can implement to motivate and inspire employees:
- Financial rewards: Bonuses, profit-sharing plans, stock options
- Non-financial rewards: Flexible working hours, employee recognition awards, paid leave
- Career development: Leadership courses, paid trips to industry conferences, tuition reimbursement
- Well-being initiatives: On-site wellness programs, mental health resources, gym memberships
Bottom line: Adopting a total rewards strategy could be an employer’s secret weapon
For small businesses looking to upgrade their approach to recruiting the best and brightest, a total rewards strategy is one to consider. Because some talented job seekers are looking for more than a competitive salary, the perks that come with these programs could make you a more attractive employer. It can also encourage long-standing team members to stick around and contribute for the long term. Many companies make it easy to build economical small business benefits packages that help you stand out from the competition. Our OnPay team wishes you the best of luck and we are happy to answer any questions!
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.