What does HR consider when designing a total rewards package

Numbers on a paycheck don't tell the whole story. While your competitors focus solely on salary bidding wars, leading companies understand that attracting and keeping top talent requires a smarter strategy.

This is where strategic total rewards packages make the difference. Rather than copying trendy perks or maxing out benefits budgets, successful HR teams focus on creating a thoughtful mix of compensation, benefits, and growth opportunities that truly matter to employees.

Want to create a total rewards strategy that sets your company apart? We're diving into the essential components that transform standard benefits packages into powerful talent magnets.

From competitive compensation to career development that matters, discover how to build an offering that makes your best employees want to stay.

Key takeaways

• A total rewards package combines compensation, benefits, recognition, and development to attract, retain, and engage employees effectively.
• HR must align rewards with business goals, employee needs, industry benchmarks, and financial sustainability for maximum impact.
• Customizing rewards, such as flexible work, financial wellness, and career development, enhances engagement and employee satisfaction.
• Compliance with legal and regulatory standards ensures fairness, mitigates risks, and supports diversity, equity, and inclusion (DEI).
• Effective communication and feedback help employees understand and appreciate their benefits, boosting utilization and retention.
• Forma’s flexible benefits platform streamlines administration, reduces costs, and enhances employee engagement. <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo today.</span>

What is a total rewards package?

A total rewards package is a comprehensive approach to employee compensation that goes beyond base salary. It includes both monetary and non-monetary elements designed to attract, retain, and motivate employees.

By offering a well-rounded package, you demonstrate your commitment to employee well-being and job satisfaction. This, in turn, can lead to improved engagement, productivity, and loyalty.

A total rewards package is tailored to your organization's unique goals, values, and culture. It aligns with your talent management strategy and helps position your company as an employer of choice in a competitive job market.

Key considerations for designing a total rewards package

When designing a total rewards package, you need to balance several key factors to ensure its effectiveness and alignment with your organization's objectives. Here are some things to remember when crafting a total rewards package for your business.

Aligning with business goals and values

A well-designed total rewards package isn’t just about compensation and benefits, it should reflect your company’s mission, values, and long-term strategic priorities. When structuring your rewards, consider how each element reinforces your organizational culture and helps achieve business objectives.

For example, if your company prioritizes innovation, offering incentives like performance-based bonuses, stock options, or professional development programs can encourage creativity and forward-thinking solutions. If customer satisfaction is a key goal, incorporating recognition programs that reward employees for exceptional service can reinforce behaviors that align with your brand’s promise.

Beyond financial incentives, non-monetary benefits, such as flexible work arrangements or wellness initiatives, can also support business goals by improving employee well-being, reducing burnout, and fostering a more engaged workforce. By ensuring that rewards align with what your company stands for, HR can create a system that motivates employees while driving business success.

Attracting and retaining top talent

A competitive total rewards package is one of the most effective tools for attracting and retaining high-performing employees. Employees today have evolving expectations, and simply offering a salary that meets industry standards is no longer enough. Companies must take a holistic approach that includes compensation, benefits, career development opportunities, and workplace culture.

To create a compelling package:

• Research market trends and benchmarks: Use industry reports, salary surveys, and competitor analyses to ensure your offerings are competitive.
• Consider employee priorities: Younger employees may prioritize student loan repayment assistance, while experienced professionals may value retirement contributions and equity options.
• Tailor unique perks to differentiate your company: Companies that offer benefits such as wellness stipends, unlimited PTO, remote work flexibility, and family-friendly policies often stand out in the job market.

Retention is equally critical. Employees who feel undervalued or see better opportunities elsewhere are more likely to leave, increasing turnover costs. Regularly assessing and updating your rewards package ensures that it remains competitive and meets employee expectations over time.

Addressing diverse employee needs and preferences

A traditional, table stakes approach to rewards no longer works. A diverse workforce has a variety of needs, influenced by factors such as age, life stage, cultural background, and career aspirations. Companies that offer personalized and flexible benefits tend to have higher engagement and satisfaction levels.

Consider offering:

• Flexible work arrangements: Options like remote work, hybrid schedules, or compressed workweeks cater to employees balancing family responsibilities, commuting challenges, or personal preferences.
• Financial wellness support: Programs such as student loan repayment assistance, home-buying support, or employer-matched retirement contributions can help employees with long-term financial stability.
• Wellness and mental health programs: Access to therapy, meditation apps, gym memberships, and wellness stipends encourages employees to prioritize their health.
• Learning and development opportunities: Employees at different career stages benefit from tuition reimbursement, leadership training, and mentorship programs to help them advance.

Ensuring cost-effectiveness and sustainability

While offering a comprehensive rewards package is essential, it must also be financially viable and sustainable over time. HR teams need to strike a balance between employee satisfaction and business affordability.

To ensure cost-effectiveness:

• Conduct a cost-benefit analysis: Evaluate which benefits provide the highest return on investment. Does a particular perk improve retention, productivity, or employee satisfaction?
• Consider tiered benefits: Offering different levels of benefits based on seniority, performance, or tenure can help manage costs while still rewarding loyalty.
• Use data to optimize spending: Leverage HR analytics to track benefit utilization rates. If certain programs are underused, funds may be better allocated elsewhere.

Complying with legal and regulatory requirements

HR professionals must ensure that all aspects of the total rewards package comply with relevant laws and regulations. Failing to meet legal standards can result in costly fines, lawsuits, and reputational damage.

Key compliance areas to consider include:

• Wage and hour laws: Ensure that compensation structures comply with minimum wage, overtime, and equal pay regulations as dictated by federal, state, and local laws.
• Health and retirement benefits: Offerings such as 401(k) plans, health insurance, and disability coverage must align with regulations like the Affordable Care Act (ACA) and ERISA (Employee Retirement Income Security Act).
• Leave policies: Adhere to legal requirements for paid leave, parental leave, and family medical leave (such as FMLA in the U.S.).
• Diversity, equity, and inclusion (DEI) considerations: Ensure that your rewards package is non-discriminatory and accessible to all employees, including individuals with disabilities.
• Tax implications: Some benefits, such as HSAs (Health Savings Accounts) and tuition reimbursement programs, have tax advantages for both employers and employees. Understanding these implications helps in structuring cost-effective rewards.

Benefits of implementing a well-designed total rewards package

Implementing a well-designed total rewards package offers several significant benefits for both your organization and your employees. Here’s what HR professionals need to know.

1. Improved employee engagement and satisfaction

A comprehensive total rewards package demonstrates your commitment to employee well-being and job satisfaction. When employees feel valued and supported, they are more likely to be engaged and motivated in their work. This, in turn, can lead to higher levels of job satisfaction and a more positive work environment.

2. Enhanced employer brand and competitive positioning

Offering a competitive total rewards package helps position your company as an employer of choice in your industry. It differentiates you from competitors and enhances your employer brand, making it easier to attract top talent. A strong reputation for taking care of your employees can also improve your overall brand image and customer perception.

3. Increased workforce productivity and performance

When employees are engaged and satisfied, they tend to be more productive and perform at a higher level. A well-designed total rewards package can contribute to this by providing the support, resources, and incentives employees need to excel in their roles. This can lead to improved individual and team performance, ultimately benefiting your organization's bottom line.

4. Better talent acquisition and retention outcomes

A compelling total rewards package is a powerful tool for attracting and retaining top talent. It can give you an edge in the job market, helping you secure the best candidates for open positions. Moreover, by meeting the diverse needs and preferences of your employees, a well-rounded package can improve retention rates and reduce turnover costs.

5. Optimized return on investment in human capital

Investing in a comprehensive total rewards package can yield a significant return on investment for your organization. By attracting and retaining high-quality talent, boosting productivity and performance, and reducing turnover costs, you can optimize the value of your human capital. Additionally, a well-designed package can help you manage labor costs more effectively by aligning your rewards strategy with your business goals and budget.

Innovative approaches to total rewards in the modern workplace

As the nature of work evolves, so should your total rewards strategy. Traditional benefits alone are no longer enough to attract and retain top talent — employees today expect personalized, flexible, and meaningful compensation packages that align with their diverse needs. 

By embracing innovative approaches, businesses can create a total rewards program that enhances engagement, well-being, and long-term loyalty.

Offering flexible and personalized benefits options

A one-size-fits-all approach to benefits is outdated. Employees have different priorities based on their lifestyle, career stage, and personal goals. Offering customizable benefits empowers them to choose what matters most. Consider integrating:

• Flexible spending accounts for health, wellness, or professional development, allowing employees to allocate funds where they see the most value.
• Modular benefits plans where employees select from a range of options such as additional PTO, enhanced healthcare, or commuter benefits.
• Lifestyle Spending Accounts (LSAs) that cover expenses like fitness, travel, mental health services, and even hobbies to support employees' overall well-being.

Providing choice and flexibility demonstrates a commitment to employee well-being and significantly boosts engagement and job satisfaction. When employees feel their employer supports their unique needs, they are more likely to stay committed and productive.

Incorporating wellness and work-life balance initiatives

Workplace well-being is no longer just a perk, it’s a necessity. Employees expect employers to prioritize mental, physical, and emotional health as part of their compensation strategy. Companies that invest in wellness programs see higher productivity, lower absenteeism, and improved retention. 

Some key initiatives include:

• Mental health support, such as free therapy sessions, mindfulness apps, or Employee Assistance Programs (EAPs).
• Fitness and nutrition programs, including gym stipends, virtual fitness classes, and healthy meal reimbursements.
• Flexible work arrangements, such as remote work options, flexible hours, or compressed workweeks to support work-life balance.
• Family-friendly benefits, like paid parental leave, childcare stipends, and eldercare assistance, helping employees manage responsibilities outside of work.

Providing unique perks and experiences

Employees value experiences and lifestyle perks that go beyond standard compensation. Offering unique, high-value benefits can differentiate your company and strengthen employee satisfaction. Consider integrating:

• Travel and adventure opportunities, such as company-sponsored retreats, paid sabbaticals, or travel stipends.
• Volunteer and social impact programs, where employees can take paid time off to support causes they care about.
• On-site or virtual wellness amenities, like massage therapy, yoga sessions, or healthy office snacks.
• Exclusive discounts and memberships, such as gym memberships, entertainment subscriptions, or personal development courses.

These perks not only enhance employees’ quality of life but also reinforce company culture and values, making your workplace more desirable and fulfilling.

Recognizing and rewarding individual contributions and achievements

Recognition is a powerful driver of engagement, performance, and retention. Employees who feel valued are more likely to be productive, motivated, and committed to their employer. Organizations should create a structured recognition program that includes:

• Spot bonuses or peer-to-peer recognition programs, allowing employees to acknowledge each other’s contributions.
• Performance-based incentives that align with company goals, encouraging productivity and innovation.
• Career milestone celebrations, such as work anniversary bonuses, personalized gifts, or public shout-outs.
• Company-wide recognition events, where top performers are highlighted and rewarded in front of their peers.

Fostering a culture of continuous learning and growth

Employees today prioritize career growth and skill development when choosing an employer. A workplace that supports ongoing learning is more likely to attract, retain, and engage top talent. To build a culture of continuous development, companies should offer:

• Training and development programs, including leadership courses, workshops, and technical training.
• Mentorship and coaching opportunities to help employees gain guidance from experienced colleagues.
• Tuition reimbursement or professional certification support, allowing employees to upskill without financial stress.
• Internal mobility and career pathing initiatives that create clear progression opportunities within the company.

Are total reward packages really the best way to keep employees engaged?

Yes, total rewards packages are one of the most effective ways to keep employees engaged, but only if they are designed to be flexible, meaningful, and easy to manage. A well-structured program gives employees the freedom to choose benefits that matter most to them, whether it’s wellness perks, professional development opportunities, or lifestyle spending accounts. 

This personalized approach fosters higher engagement, satisfaction, and long-term loyalty, ensuring that employees feel valued and supported.

While it may seem overwhelming to set up, managing a total rewards program doesn’t necessarily have to be complicated. Forma’s flexible benefits platform streamlines everything from claims processing to compliance, employee communication, and vendor management, so HR teams can focus on strategic priorities instead of administrative work. Our platform provides a seamless, user-friendly experience, ensuring employees fully understand and engage with their benefits, reducing confusion, and increasing utilization.

Communication is key, and Forma takes care of it for you. We ensure employees receive clear, timely information about their benefits, eliminating the need for HR teams to constantly answer questions or chase down engagement. With Forma, companies also save money by consolidating spending account vendors, optimizing tax compliance, and reducing administrative costs.

Top companies like Honda, lululemon, and Tripadvisor trust Forma to simplify their benefits programs and boost employee satisfaction and you should too.

<span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo today</span> to see how Forma can simplify your benefits strategy while reducing costs and increasing employee satisfaction.