Definition
The complete package of financial and non-financial benefits that an employee receives from their employer, encompassing base pay, variable pay, benefits, learning opportunities, work environment, and career development.
UK Context
The CIPD's total reward framework is widely used by UK organisations to design and communicate their employment value proposition. Total reward statements are becoming standard practice, particularly in the public sector where salary levels may be lower than the private sector but benefits such as pension contributions, annual leave, and flexible working are more generous.
Best Practices
- Produce annual total reward statements showing the full monetary value of each employee's package
- Design the reward package with input from employees to understand what they value most
- Offer flexibility through benefit choices or salary sacrifice arrangements where possible
- Benchmark the total package, not just base salary, against the external market
- Communicate the total reward proposition clearly during recruitment and throughout the employee lifecycle
Frequently Asked Questions
What is a total reward statement?
A total reward statement is a document, usually produced annually, that shows an employee the full monetary value of their employment package. It typically includes base salary, bonus or variable pay, employer pension contributions, insurance premiums, company car value, and any other benefits. It helps employees understand the true value of their package.
How does total reward differ from total compensation?
Total compensation typically refers to the financial elements of the package: salary, bonus, benefits, and share schemes. Total reward is broader and also includes non-financial elements such as learning opportunities, career development, work-life balance, recognition, and the work environment.
Why is total reward important for retention?
Employees who only see their base salary may undervalue their package. Total reward statements and communication help employees appreciate the full value of their employment, which research shows increases engagement and reduces turnover. A strong total reward proposition also differentiates the employer in the talent market.