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The importance of an authentic total rewards philosophy

By Kathleen Jinkerson


A total rewards philosophy plays an important role in an organization. Its overarching objective is to align the mission, values and goals of a company with its rewards program to ultimately drive performance.

While this may sound straightforward on the surface, there are other complex factors to consider. For instance, the philosophy must also be relevant to the workforce, and in order to fulfill its true purposes, it must also be communicated clearly.

Research indicates only two-thirds of companies have some form of a total rewards philosophy in place. Of those, 60 per cent have their philosophy in writing, while only 30 per cent feel they’re communicating that philosophy effectively. What, precisely, is holding companies back from developing a documented and well-communicated total rewards philosophy?
According to a poll conducted by HRsoft and The Talent Company, 36 per cent of participating HR and total rewards professionals say that lack of leadership support and buy-in is the greatest challenge towards creating a total rewards philosophy. Differing opinions on rewards came in as a close second in terms of barriers to creating a philosophy at 32 per cent. Of the remaining 18 per cent, respondents said their workload held them back, while 14 per cent said they didn’t know how to create a philosophy.

These results are telling. While HR may be fully aware of the importance of a total rewards philosophy, other business leaders may not understand its full value. Moreover, the second most cited challenge – differing opinions – showcases how challenging it is to take a unified approach to total rewards. Indeed, achieving alignment and developing a philosophy that resonates with leadership and employees alike can be difficult. Nonetheless, reconciling these differences to develop a total rewards philosophy is important, as it serves some distinct purposes.

An organization’s total rewards philosophy is used to:

  • Align the company’s mission, values and objectives to employee pay.
  • Attract, retain and motivate employees.
  • Determine how pay impacts employees.
  • Provide a clear, direct statement and commitment.
  • Reinforce alignment between rewards practices, HR and business strategies.
  • Initiate discussions concerning compensation and rewards.
  • The total rewards philosophy can also be used to determine:
  • Where an organization targets and pays out rewards.
  • How to balance the various elements of total rewards.


Moreover, in terms of attracting and retaining employees, the rewards philosophy is a critical piece in developing a unique and compelling Employee Value Proposition. It is a foundational piece on which effective processes can be built and is a critical element of a business strategy.

There is a commonly-held assumption that all organizations are looking to be competitive, fair and equitable in their compensation practices, but that’s not necessarily true. Moreover, often these goals contradict each other. Determining what’s most important to your company is a key piece of the puzzle when defining your philosophy.

When discussing a rewards philosophy with stakeholders, consider the following questions:

  • What should a rewards program do to help the organization succeed?
  • What is the organization’s capacity to pay? What are the restraints on that capacity?
  • Are we seeking to be fair, equitable and/or competitive? How will these principles be demonstrated?

Answering these questions will help to shape your total rewards philosophy.

Of course, certain factors should not be overlooked. Pay equity, for one, demands up-to-date knowledge on relevant legislation so a company can manage its risks proactively. Oftentimes, wage inequality is an act of omission, not a deliberate decision. If a company pays people in similar jobs differently, make sure there is a legally defensible reason for doing so. Factors such as varying education levels and tenure can back up differentiated pay, but it’s important that these factors are documented.

Developing and implementing a total rewards philosophy is one of the best endeavors an organization can pursue. It is a key element of an overall business strategy and plays an important role in communicating an Employee Value Proposition. While the process of developing a total rewards philosophy will require some thoughtful planning, it is possible to reconcile different opinions, achieve alignment among business goals and the approach to rewards, and devise a philosophy that’s relevant to a company’s workforce by following the basic framework laid out in this article.


Kathleen Jinkerson is a practice leader, HR and Total Rewards Solutions at The Talent Company. Attend her presentation, “Innovation in Total Rewards,” on Feb. 1 at noon.



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