Why total rewards packages are valuable to an employer

Total rewards packages have become an essential tool for employers aiming to attract and retain top talent in competitive markets. These programs go beyond base salary, offering employees meaningful benefits like health coverage, retirement savings, flexible spending accounts, and lifestyle perks. 

For organizations, the strategic use of total rewards isn't just about employee satisfaction—it’s about fostering loyalty, enhancing productivity, and reducing turnover. By aligning rewards with employee preferences, businesses can build a workforce that is both motivated and engaged. 

As modern employees increasingly value personalization and flexibility, total rewards offer a way to meet these expectations while ensuring efficient resource allocation. For employers, the value lies not just in the benefits themselves but in how they drive measurable results for the organization. Here’s why total rewards packages benefit the employer just as much as the employee.

Key takeaways

• Total rewards packages combine salary, benefits, and perks to attract top talent, foster loyalty, and boost employee engagement.
• Employers gain competitive advantages by offering flexible rewards that meet diverse workforce needs and align with business goals.
• A well-designed program enhances retention, reduces turnover costs, and increases productivity through recognition and professional development opportunities.
• Total rewards can lower costs with tax savings, streamlined benefits administration, and incentives that reduce healthcare expenses.
• Regularly reviewing and adapting total rewards strategies ensures relevance, competitiveness, and ROI in a changing workforce landscape.
• Partner with Forma’s flexible benefits platform to simplify program management, optimize rewards, and maximize employee satisfaction. <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo today</span>

What are total rewards packages?

Total rewards packages are compensation strategies that offer more than just an employee’s salary. They combine financial and non-financial incentives to create a well-rounded approach to employee compensation. These packages typically include elements such as base pay, performance bonuses, stock options, and benefits like health insurance, retirement plans, and paid time off. 

Beyond traditional offerings, total rewards often incorporate lifestyle perks such as wellness programs, flexible work arrangements, tuition reimbursements, and professional development opportunities.

The goal of total rewards is to provide value that resonates with employees on a personal and professional level, fostering engagement and satisfaction while supporting business objectives. By tailoring these packages to meet diverse workforce needs, employers can enhance recruitment efforts, boost retention, and encourage peak performance. 

A well-designed total rewards package is not just an expense but an investment in building a motivated, loyal, and productive workforce.

Benefits of total rewards for employers

By implementing a thoughtfully designed total rewards package, employers can unlock a range of advantages that not only support their workforce but also drive organizational success. Here are some of the top benefits of total rewards for employers.

Attract top talent

Total rewards packages are powerful tools for attracting top talent in a competitive job market. By offering a comprehensive and compelling compensation package, you differentiate your company from others vying for the same candidates.

Highly skilled job seekers are looking for more than just a salary; they want to work for an employer that values their well-being and invests in their future. 

By showcasing the full range of rewards your company provides, from competitive pay and benefits to work-life balance and professional development opportunities, you can capture the attention of the best and brightest in your industry.

Retain valuable employees

Retaining your top performers is just as important as attracting new talent. When you invest in your employees' well-being and job satisfaction through a robust total rewards package, you demonstrate your commitment to their long-term success within your organization.

Employees who feel valued and supported are more likely to remain loyal to your company, reducing turnover and the associated costs of recruiting and training new hires. Personalized rewards, such as flexible work arrangements or professional development opportunities, can be particularly effective in retaining employees who may otherwise be tempted to seek new opportunities elsewhere.

Boost employee engagement and productivity

Engaged employees are more productive, innovative, and committed to their work. A well-designed total rewards package can significantly boost employee engagement by demonstrating your company's investment in their success and well-being.

When employees feel that their contributions are valued and rewarded, they are more likely to go above and beyond in their roles. According to a Gallup report, highly engaged employees are 18% more productive than their less engaged counterparts. Additionally, companies with high employee engagement levels see a 23% increase in profitability.

Recognition programs, such as peer-to-peer acknowledgments or spot bonuses, can be particularly effective in fostering a culture of appreciation and motivation. 

Additionally, offering opportunities for skill development and career growth can keep employees engaged and invested in their work.

Foster a positive company culture

Your total rewards package is a reflection of your company's values and priorities. By offering a comprehensive and inclusive range of rewards, you send a message to your employees and potential hires about what your organization stands for.

A strong emphasis on work-life balance, for example, demonstrates that you value your employees' well-being and trust them to manage their time effectively. Other than that, professional development offerings show that you are committed to helping your employees grow and advance within your company. 

By aligning your total rewards with your company culture, you can attract and retain employees who share your values and contribute to a positive work environment.

Improve business performance

Ultimately, investing in a total rewards package can have a significant impact on your company's bottom line. By attracting and retaining top talent, boosting employee engagement and productivity, and fostering a positive company culture, you create a workforce that is motivated, innovative, and committed to your organization's success.

By viewing your total rewards package as a strategic investment rather than a cost center, you can position your company for long-term success and growth.

Learn more by reading our blog what is a total rewards package?

5 components of a comprehensive total rewards package

A well-rounded total rewards package should include several key components that address your employees' diverse needs and preferences. Here are some elements that, more often than not, have to be a part of your total rewards package.

1. Competitive compensation

The foundation of any total rewards package is competitive compensation. This includes:

• Base salary: A base salary that aligns with industry standards and local market rates to attract and retain top talent.
• Bonuses and incentives: Performance-based bonuses, spot awards, and other incentives to motivate and reward high-performing employees.
• Equity compensation: For some roles and levels, consider offering stock options, restricted stock units, or other forms of equity compensation to foster a sense of ownership and long-term commitment to your company.

2. Attractive employee benefits

A comprehensive benefits package demonstrates your commitment to your employees' well-being and can be a significant factor in attracting and retaining talent. The best employee benefits may include:

• Lifestyle spending accounts (LSA): Lifestyle spending accounts empower employees to personalize their benefits by allocating funds toward what matters most to them—whether it’s fitness memberships, mental health support, childcare, or professional development. This flexibility from LSAs in total reward packages shows employees you value their diverse needs and promotes work-life balance.
• Health insurance: Offer a range of medical, dental, and vision insurance options to support your employees' physical and mental health.
• Retirement plans: Provide a competitive 401(k) match or other retirement savings plans to help your employees plan for their financial future.
• Paid time off: Generous vacation, sick leave, and personal days show that you value your employees' work-life balance and personal well-being.
• Flexible spending accounts: Offer health savings accounts (HSAs), flexible spending accounts (FSAs), and other tax-advantaged savings vehicles to help your employees manage their healthcare and dependent care expenses.
• Wellness programs: Implement wellness initiatives, such as fitness challenges, stress management workshops, and health screenings, to promote a healthy and engaged workforce.

3. Work-life balance initiatives

Recognizing the importance of work-life balance, top employers offer a range of initiatives to help employees manage their personal and professional responsibilities. These may include:

• Flexible work arrangements: Allow employees to work from home, adjust their schedules, or compress their workweek to accommodate their individual needs and preferences.
• Paid parental leave: Offer generous paid leave for new parents to support their family obligations without sacrificing their career advancement.
• Childcare and eldercare support: Provide on-site childcare, subsidized childcare benefits, or eldercare resources to help caregiving employees balance their caregiving responsibilities.

4. Recognition programs

Acknowledging and rewarding your employees' contributions is a powerful way to boost engagement, motivation, and job satisfaction. Consider implementing:

• Peer-to-peer recognition: Encourage employees to recognize and appreciate their colleagues' efforts and achievements through a formal peer-to-peer recognition program.
• Service awards: Celebrate employees' milestone anniversaries with your company through meaningful service awards and public acknowledgment.
• Spot bonuses: Provide on-the-spot bonuses or rewards for employees who go above and beyond in their roles or demonstrate exceptional performance.

5. Professional Development Opportunities

Investing in your employees' professional growth and skill development benefits both your employees and your organization. Consider offering the following:

• Training and development programs: Provide a range of training options, from in-person workshops to online courses, to help employees enhance their skills and knowledge.
• Tuition reimbursement: Offer financial support for employees who wish to pursue advanced degrees or certifications relevant to their roles.
• Mentoring and coaching: Implement formal mentoring and coaching programs to support employees' career development and leadership growth.

By offering a comprehensive total rewards package that includes these key components, you demonstrate your commitment to your employees' well-being, job satisfaction, and professional growth. This investment in your workforce can pay significant dividends in terms of attracting top talent, retaining high-performing employees, and fostering a positive and productive work environment.

How to design an effective total rewards strategy

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Developing a total rewards strategy that aligns with your company's goals and values while meeting your employees' needs requires careful planning and execution. Here are some key steps to designing an effective total rewards program:

Align with company goals and values

Your total rewards strategy should reflect your organization's mission, values, and business objectives. Consider how your rewards package can support your company's long-term goals, such as:

• Attracting new talent
• Retaining top talent
• Fostering innovation
• Expanding into new markets

Ensure that the components of your total rewards program reinforce your company culture and promote the behaviors and attitudes you want to cultivate in your workforce.

Assess employee needs and preferences

To create a total rewards package that resonates with your employees, you need to understand their diverse needs, preferences, and motivations.

Firstly, conduct employee surveys, focus groups, or one-on-one interviews to gather feedback on what types of rewards and benefits your employees value most. It may also be a good idea to segment your workforce by demographics, job roles, or life stages to tailor your offerings to specific groups.

Creating a comprehensive employee benefits strategy that addresses the unique needs of your multigenerational workforce can help you attract and retain top talent across all age groups.

Benchmark against industry standards

To remain competitive in your industry, regularly benchmark your total rewards package against those of other companies in your sector and geographic location.

• Participate in salary surveys
• Review benefits data from industry associations
• Monitor job postings and offers from your competitors

Use this information to identify areas where your total rewards program may be falling short and to make informed decisions about how to allocate your compensation and benefits budget.

‍Download Forma’s 2025 benchmark report for the most recent data trends and insights. 

Communicate the value to employees

Effectively communicating the value of your total rewards package to your employees is just as important as designing a competitive program. Many employees may not fully understand or appreciate the full range of rewards and benefits your company offers, so it's crucial to educate them about the value of their total compensation.

Use a variety of communication channels, such as benefits guides, webinars, and one-on-one meetings, to help employees understand and make the most of their rewards. Furthermore, consider providing personalized total rewards statements that break down the monetary value of each component of an employee's compensation and benefits package.

Communication is important and without it, a huge chunk of your total rewards packages can go to waste. If communicating back and forth seems like too much effort, partnering with a third-party administrator (TPA) can take the burden of communication off your plate. 

TPAs specialize in ensuring employees not only understand but truly appreciate the full value of their total rewards package. From creating tailored benefits guides and hosting informative webinars to providing personalized total rewards statements, a TPA handles the heavy lifting. They leverage their expertise to convey the monetary and non-monetary value of each benefit, using clear and engaging communication strategies. 

This allows your HR team to focus on strategic initiatives while ensuring employees remain informed, engaged, and satisfied with their compensation. With a trusted partner managing these efforts, you can eliminate confusion, streamline communication, and ensure your employees fully realize the benefits your organization offers—all without the administrative headaches.

Regularly review and adjust

Your total rewards strategy should never be static—it should adapt and grow alongside your company’s goals and your employees’ evolving needs. Your business should regularly evaluate its effectiveness by tracking key metrics like employee engagement, retention rates, and benefits utilization. 

Actively seek employee feedback to uncover opportunities for improvement and ensure the program remains relevant, competitive, and impactful. Staying informed about emerging trends, such as cutting-edge benefits or flexible work options, can help you refine your approach and maintain an edge in attracting and retaining top talent. 

By treating your total rewards program as a dynamic, ever-improving tool, you can align it with your business objectives while continuously meeting the expectations of a diverse and changing workforce.

What is the ROI of total rewards programs?

While it may seem like total rewards programs are added expenses, there are several ways that they improve ROI and even cut costs typically associated with table stakes benefits.

Total rewards programs are often seen as an investment in employee engagement and satisfaction, but they are also powerful cost-saving tools for organizations. By strategically designing and managing total rewards, companies can achieve measurable ROI through reduced expenses, increased efficiency, and enhanced employee retention. Here are four key methods through which total rewards programs save money.

1. Offer more perks for less cost

Total rewards programs allow employers to consolidate a variety of perks into a single, streamlined package. Instead of negotiating and managing individual vendors for each benefit, companies can bundle options like wellness programs, lifestyle spending accounts, and tuition reimbursement through a flexible benefits platform. 

This consolidation reduces administrative overhead, simplifies vendor relationships, and enables bulk pricing or discounts. The result? Employers offer a wide array of perks at a fraction of the cost of managing them separately.

2. Eliminate expense management systems

Traditional reimbursement models, where employees submit expenses for approval, often involve costly third-party expense management systems and significant HR involvement. With total rewards programs, employers can eliminate these systems by shifting to structured benefits like preloaded spending cards or centralized accounts. 

This automation reduces administrative costs, improves efficiency, and ensures compliance, all while empowering employees to access benefits directly without time-consuming reimbursement processes.

3. Lower healthcare costs through incentives

Offering flexible rewards, such as lifestyle spending accounts, can encourage employees to select more cost-effective medical plans. For example, an organization might provide additional LSA funds or other incentives to employees who choose high-deductible health plans (HDHPs). 

This not only helps employees save money on premiums but also lowers the organization’s overall healthcare expenses, creating a win-win scenario.

4. Maximize tax savings

Total rewards programs are designed to take advantage of tax savings for both employers and employees. Benefits such as pre-tax commuter accounts, health savings accounts, and dependent care accounts reduce taxable income for employees while lowering payroll tax obligations for employers. 

By working with a TPA, businesses can ensure their programs are fully optimized and compliant with tax regulations, unlocking significant savings over time.

Are total rewards packages worth it for employers?

Yes, total rewards packages are absolutely worth it for employers. They go beyond compensation, driving employee engagement, retention, and satisfaction while offering significant cost-saving opportunities. By aligning rewards with employee preferences and optimizing tax savings, these programs not only enhance workplace culture but also deliver measurable ROI. With tools like lifestyle spending accounts and flexible benefits, businesses can meet the diverse needs of their workforce while staying competitive in talent acquisition and retention.

While it may seem like it, managing a total rewards program doesn’t have to be complex. Forma’s flexible benefits platform makes it simple to design, implement, and manage a program tailored to your workforce. 

Our end-to-end solutions handle compliance, claims processing, and employee communication, so you can focus on strategic growth while we handle the details. 

Trusted by companies like Honda, lululemon, and Tripadvisor, Forma delivers customizable solutions that maximize value and streamline administration. Empower your employees with the benefits they truly value and see the ROI for yourself. 

<span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">Schedule a demo today</span> and let Forma help you and your employees get the most out of your total rewards strategy.

*This document is for informational purposes. Forma is not engaged in the practice of law. Nothing contained herein is intended as tax or legal advice nor to replace tax or legal advice from counsel. If you need tax or legal advice, please consult with counsel or a certified tax professional.