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Total Reward Statements Morph From Value-Add to Call to Action

July 10, 2007
Related Topics: Retirement/Pensions, Benefit Design and Communication, Featured Article, Compensation
Once, total reward statements were a rundown of how much an employer paid for an employee to work at the company. The personalized documents, which sometimes were published in fancy bindings, were designed to retain and encourage employees by letting them know how much the company spent on them. They have been particularly useful over the past several years as more employers have moved away from shouldering the bulk of retiree and health care costs to shifting some benefit costs to employees. The statements showed employees that even with cost-sharing, the company still was investing a lot in their benefits.

    But with the Internet’s ability to communicate very current information to employees, total reward statements have taken on a new meaning for most employers. While these communications are still an effective way of engaging and retaining workers, more companies are using them to prompt employees to take action, says Debbie Slappey, a communications consultant at Mercer Human Resource Consulting.

    "By using real-time data, companies can use these statements as a call to action for employees," she says. For example, many employers are tying in their organization’s business goals into these statements so that employees can see how close they are to these targets.

    Other companies are using statements to encourage employees who are not taking full advantage of benefits, like 401(k) plans or wellness programs, to do so, experts say.

    "Total reward statements have become a two-way discussion now," Slappey says. "If you are not talking about rewards, it means you are less competitive than other companies because employees have come to expect it."

    Employers who have adopted total reward statements are seeing the benefits. Ninety percent of employees have a higher appreciation for the value of their employer-provided benefits after receiving these statements, according to a recent study by Aon Consulting. Ninety-five percent said they will save their statements and refer to them throughout the year.

    And a year-over-year analysis by Aon found that the number of employees who were on track to retire at age 65 rose 5 percent if they were receiving a total reward statement with a focus on retirement-planning education.

    Although determining the return on investment from offering these statements can be difficult, Buck Consultants estimates that a company with 5,000 employees and an average per-employee salary of $37,000 could realize up to $1 million in savings.

    That number includes savings gained during future wage negotiations, turnover reduction and health care savings. By communicating more about health care expenses, for example, companies can get employees to accept premium increases more readily, thus allowing employers to realize greater health care savings, according to Buck.

    "Total rewards statements help companies with cost sharing, retention and recruiting," says Scot Marcotte, principal and technology solutions leader in Buck’s Chicago office.

    Indianapolis-based WellPoint has offered employees an online total reward statement for the past five years, but relaunched the site in January to incorporate employees of Anthem, which merged with WellPoint in 2004.

    The site is designed as a portal for HR, giving WellPoint’s 42,000 employees a view of what the company offers and pays for them in five categories: career and company; pay and recognition; financial future; balanced life; and well-being, says Kelly Soper, vice president of compensation at the health benefits provider.

    For each category, employees can see not only what WellPoint pays for their benefits, but also what the company offers that they’re not taking advantage of, Soper says.

    For example, if an employee is eligible for WellPoint’s tuition reimbursement program but doesn’t take advantage of it, the statement will point out what the employee could be doing, she says.

    The financial future section, which discusses retirement benefits, also includes how much employees can expect to get from Medicare and Social Security, so they can see if they need to save more.

    The balanced life section outlines paid-time-off days and holidays. The well-being portion describes the employee’s health care benefits, as well as programs the employee might not be using.

    The pay and recognition category discusses the employee’s salary and incentive program. This section also includes the company’s annual business goals, with a real-time view of how close the business is to meeting them, Soper says.

    "Employees can always log on to the site to see how we are doing compared to our targets," she says.

    More companies are taking the approach that WellPoint is using to ensure that their total reward statements are more strategic, as well as to reach employees who might be working far away from corporate headquarters, says Bill Crawford, senior vice president at Aon Consulting.

    "This is a great way to get that employee working in Des Moines, Iowa, to feel more engaged in the entire organization," he says.

    Another trend among employers is using the statements as a performance management tool. WellPoint’s company and career section of its total reward statement not only discusses the company’s values and performance management system, but details how the employee is ranked. This is information that only the employee sees. It also offers information on how employees can learn more about opportunities for promotion at the company, Soper says.

    But an increasing number of companies are doing even more to tie their total reward statements into their performance management, Slappey says. Some are using their total reward statements as a starting point for annual performance reviews. Managers will sit down with employees and, with at least part of the statements in hand, discuss with them their goals and how they can reach certain targets, she says.

    "Companies are seeing that putting up a statement on its own doesn’t create engagement," she says. "What engages employees is explaining to them how they can reap those rewards and get ahead in terms of opportunities."

Other uses and challenges
    One of the greatest challenges with offering these statements is making sure that employees see them, Soper says. Once companies have put the statements online, they have to make sure that employees log in to view them.

    To address this, WellPoint and other companies periodically remind employees about the statement portal. An ideal time to do this is during open enrollment periods, Marcotte says.

    Another challenge that WellPoint and others are confronting is how to use the data they collect to increase adoption rates and reduce turnover, Soper says. For example, if WellPoint had a concern about turnover among its nursing population but also noticed that many of nurses who remained with the company took advantage of its tuition reimbursement program, the company could do more to highlight that offering to its nurses.

    An increasing number of multinational companies are trying to apply these statements on a global basis, but that comes with its own set of challenges, Marcotte says.

    "Companies need to consider doing this through a different cultural lens," he says. "For example, how is stock option ownership perceived in China?"

    Employers also have to figure out if it makes sense to outline what they offer as benefits given that in many countries, employees receive state-sponsored benefits, Crawford says.

    Finally, companies increasingly are using total reward statements as a recruiting tool. Ten years ago, these statements were just for existing employees, but companies today realize they can be a very effective way of luring talent, Crawford says. The company is, after all, offering a new employee much more than just a paycheck.

    "It makes a huge difference for a prospect that is being offered a $50,000 salary to see that the actual total compensation is worth $70,000," he says.

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