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The importance of a well-designed and executed Total Rewards System (TRS) cannot be overemphasized. The rewards system of an organization should be linked to its strategic objectives. For long, human resource (HR) professionals have experimented with a variety of innovative reward strategies such as goal sharing and skill-based pay. Whatever the approach adopted, it is often realized that the right rewards system should incorporate both monetary and nonmonetary benefits to the employees as a way of generating positive business results. The results include better job satisfaction, improved individual and organizational performance, and enhanced workforce morale and employee loyalty.
The core of the rewards system should always be to align the interests of the workers to those of the organization. Consequently, many organizations have moved beyond merely experimenting new systems to actualizing them (Caminal, 2012). Aside from the specific reward systems, their mode of implementation design, delivery, execution and evaluation also determine their overall success. Therefore, the overall success of a total rewards plan depends on its careful design and implementation to tackle the myriad challenges often realized in the process. This paper seeks to formulate a total rewards strategy for Lexion Insurance Company. The company has a workforce of over 20, 000 employees of which 2000 serve in middle-level management positions. The company operates in 17 countries across four continents.
The Need for a Total Rewards System
For a multinational organization operating across different countries, the formulation and execution of an effective total rewards system is complicated by the challenge of diversity. Across the world, differences in culture, social, and political systems create different motivations for employees in the workplace (Thomas, 2009). It would, therefore, be inappropriate to design a uniform total rewards strategy to be used in all the areas of operation. Lexion Insurance Company recognizes that benefits constitute the most important part of the employee relationship. Thus, the company acknowledges the need to provide its employees with financial benefits, access to health care, and programs that promote work/life balance. Nevertheless, across all geographic locations, the top priority of the total rewards program is to help in finding, motivating, and keeping talent within the organization (Thomas, 2009). Due to the challenges of locating and engaging the right talent, it is important to motivate employees effectively to retain and obtain maximum output from them.
HR leaders across the world agree that identifying and retaining top talent is a major challenge. In the service sector like insurance, employee turnover can be very high in the event of a weak rewards program (Bussin & Van Rooy, 2014). Also, HR practitioners have to manage the rising costs of total rewards vis-à-vis short and long-term benefits. Lexion Insurance requires a total rewards system that appropriately remunerates its employees. The compensation can be based on both fixed and variable pay in addition to short and long-term incentive pay. The company also seeks to provide health benefits to its employees through a range of programs depending on the country. The company further recognizes the need for personal recognition and career development as imperative needs for employees in any organization. [Need an essay writing service? Find help here.]
Total Rewards Strategy
Lexion Insurance understands the importance of a proper compensation across its areas of operation. As a result, the company proposes a range of pay strategies that will act as incentives to promote the retention of employees.
There will be a base fixed pay offered to all employees depending on their positions in the organization. The fixed pay will be very competitive on the basis of the country of operation. The philosophy of the organization is to provide a fixed compensation that attracts the top talent in the industry.
The variable pay system will be based on the level of performance and results achieved by the employee. This pay will be offered as a bonus at the end of a performance period. The objective here is to motivate employees to work harder and perform better while promoting healthy competition among employees. The variable pay system will apply greatly in emerging economies like Brazil where the proportion of youth is high. In any case, the needs and expectation of employees slightly vary across generations.
Short-term incentive pay
Lexion Insurance will periodically offer short-term payments on exceptional performance. Depending on the country, this compensation will be offered yearly or half-yearly.
Long-term incentive pay
The company seeks to reward its dedicated employees in the long-term through restricted stock, stock options, performance shares, and other available options of ownership depending on the country of operation. The option will enable employees to work harder with the objective of getting such ownership rights.
Lexion Insurance operates in both developed and developing countries. Consequently, the need for health insurance varies since most developed countries have good universal health insurance. The company will offer health and dental insurance in line with the specific needs of employees in their countries. There will be health and welfare plans that incorporate health insurance, disability plans, and life insurance. Retirement contributions will be made partly by the employee and the company. Also, the company will implement Pay for Time Not Worked as a means of income protection. The benefits package will extend to leave of absence, vacation, sick, and bereavement leave. The core of objective of these benefits program is to cater for both the employees and their families.
The goal of the work/life balance programs is to provide employees with an opportunity to realize their personal responsibilities while also fulfilling their duties within the organization. In the US, research indicates that over half of the employees feel overworked and are always seeking to find better job opportunities (Greene, 2014). The organization, therefore, strives to assist employees to strike a healthy balance between work and personal life. The objective here is to keep employees happy and more productive. To this end, the organization stresses on flexibility to accommodate irregular schedules from employees arising from family demands. Additionally, the organization will offer counseling services to assist employees in planning for their retirement as well as providing ideas on investment.
Performance and Service Recognition
The company finds the need to recognize and rewards long time dedication from the employees. While employee turnover is usually high in most service industries, many employees still dedicate their careers to maintain a single employer for a long time (Thomas, 2009). In this respect, the company seeks to reward loyalty through various programs. There will be service or retirement awards for employees leaving the organization. Rewards will also include appreciation luncheons, spot awards, managerial recognition programs, peer recognition awards, and goal-specific awards. Performance and service recognition awards vary in every country depending on legal requirements and employee preference.
Career development opportunities will be offered to help grow individuals within the organization. While career development goals are typically different for each employee, every individual has an aspiration to advance within the organization (Greene, 2014). The organization makes it a duty to offer skills to the employees to enhance their ability to grow and further their careers. In line with this, the company will institute an elaborate internship program where college students or fresh graduates will be offered an opportunity to gain practical skills and experience in the insurance industry. The program will act as a ladder to greater opportunities within the company and beyond. Considering the organization has over 2000 middle-level managers, the need for international exposure is significant. International assignments will be offered to enable managers to experience different cultural, political, and social settings to enhance their performance and avail more opportunities. The company has an efficient internal promotion and transfer program that encourages effective service delivery. Seminars and workshops will regularly be conducted to equip employees with emerging trends in the industry and to offer platforms for brainstorming. Similarly, the company will offer self-development courses and leadership training programs. Employees who pursue career development courses on their own shall be eligible for tuition reimbursement.
Advantages of the Total Rewards Strategy
Ease of Recruitment
The many benefits and inducements offered in the total rewards program will help to sell the organization to potential employees. Consequently, many qualified and high-performing employees will seek to come on board. In most cases, organizations spend much money trying to attract the best employees in the industry.
Sign of Progress
Employees generally prefer to be associated with progressive organizations. Creating an active, well-respected brand, therefore, begins with an effective total rewards program.
Promoting Employee Engagement
The total rewards strategy will help to enhance employee engagement without any additional costs. Engaged and connected employees will spread positive attributes about the organization. With time, the reputation of the company grows as the best place to work. Offering equitable benefits to employees helps to build a sense of appreciation and commitment from the employees which ultimately translates into positive performance.
High Retention Rates
Employee retention is boosted when there is satisfaction with the total rewards system of the organization. For Lexion insurance, this will be achieved through the evenhanded compensation and elaborate benefits package. The suitable work environment will encourage employees to stay and offer their best performance for the company.
For a multinational corporation with many employees like Lexion Insurance, there is a need to contain costs even in the face of providing an effective total rewards program. The rewards plan will work seamlessly across different countries with a view of limiting long term costs of managing employees. As the company benefits from improved performance, it can then raise pay to give employees a sense of worth and encourage retention.
Motivated and well-engaged employees are an important means of achieving competitive advantage through high-performance and lower turnover (Engle & Mendenhall, 2004). Nevertheless, it has been recognized that many employees still require help in managing their retirement benefits and some need guidance on the advantages plans. The organization will, therefore, communicate the total rewards programs in a way that all employees are fully aware. The employee benefits will be well articulated to the employees during hiring and orientation, in meetings, and performance reviews. HR departments within the company shall regularly provide the employees with information on their benefits. Checklists and information packages will be given to new hires and those about to retire. In the case of any changes, the information will be communicated early enough to enable employees to make appropriate adjustments. The company will also use marketing and technology solutions to create awareness to the employees on their benefits.
Devising a Pay Structure
The company recognizes the need for a competitive salary structure in all countries of operation. Consequently, this will be achieved through market research in the different countries to determine the average pay in the industry. Considering the changing economic environment across the world, the company will regularly review its rewards program. The pay package will remain competitive. In devising the pay structure, the company will focus on the long term benefits such as retention, reputation, and improved performance. In countries like the US, the law requires that wages are negotiated between organizations and unions (Engle & Mendenhall, 2004). The company will, therefore, comply in such situations while also ensuring the compensation remains very competitive and attractive.
Bussin, M. & Van Rooy, D. (2014). Total rewards strategy for a multi-generational workforce in a financial institution. SA Journal of Human Resource Management, 12(1).
Caminal, R. (2012). The Design and Efficiency of Loyalty Rewards. Journal of Economics & Management Strategy, 21(2), 339-371.
Engle, A. & Mendenhall, M. (2004). Transnational roles, transnational rewards: global integration in compensation. Employee Relations, 26(6), 613-625.
Greene, R. (2014). The Role of Employee Ownership in the Total Rewards Strategy. Compensation & Benefits Review, 46(1), 6-9.
Thomas, K. (2009). Intrinsic Motivation at Work: What Really Drives Employee Engagement. San Francisco: Berrett-Koehler Publishers.