Describe each of the top five (5) advantages of a total rewards approach.
Total rewards should embrace everything that today’s employee values in the employment relationship. Because total rewards are made up of all the tools that attract, motivate and retain employees, employers need to develop an effective strategy that works with its organizational demographics. (WorldatWork, 2007, pg. 4) There are five (5) advantages of a total rewards approach: Increase Flexibility, Improved Recruitment and Retention, Reduced Labor Cost/Cost of Turnover, Heightened Visibility in a Tight Labor Market, and Enhanced Profitability. Increased flexibility total rewards approach “combines transactional and relational awards to be mixed and
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Reduced Labor Cost/Cost of Turnover can cost an organization a lot of money with replacing and training new employees. According to the U.S. Department of Labor, it costs one-third of a new hire's annual salary to replace them. Direct costs include advertising, sign on bonuses, headhunter fees and overtime. Indirect costs include recruitment, selection and training and decreased productivity while current employees pick up the slack. (http://www.sashacorp.com/turnframe.html) The author of WorldatWork (2007) elaborates on the cost of turnover includes indirect cost such as losses from customers and sales, as well as decreased efficiencies as productive employees leave and the remaining employees are distracted. (pg.16) Heightened Visibility in a Tight Labor Market has a major impact on the turn of the economy and the demographic shift thus making organizations aware that every employee is essential even more when there is a shortage of employees and more jobs than employees. The market is getting tighter with budget cuts and the fall of the economy and it may be more beneficial for the employer to realize talent shortages are becoming a “chronic condition” of the business life. Having a clear understanding of what employees perceive, and aligning their needs with the business need, will allow companies to reallocate their investment dollars to match what employee’s anticipate and in return help the organization achieve its goal. (WorldatWork, 2007,