Why Have A Remuneration Strategy?

by admin

Why Have A Remuneration Strategy?

by admin

by admin

The notion of developing an entire strategy around the pay and remuneration aspect of your business may seem like overkill.

That’s understandable, but being that it’s often the largest cost to a business, can you really afford to not get it right?

If you have ever asked yourself questions like:

  • How can I keep my employees motivated and engaged?
  • How can I encourage my employees to focus on ____ (fill in the blank)?
  • How can I attract more highly skilled employees?
  • How can I reduce staff turnover?
  • How can I create a more positive company culture?
  • How can I reach my growth targets?

then a remuneration strategy may be just what you need.

With the preferences of the workforce changing in our post-pandemic world of work, a more progressive approach to remuneration and reward management can benefit your company greatly.

But first, the basics…

What is a remuneration strategy?

A remuneration strategy is a planned method of paying employees that a company can adopt to help support its goals and objectives. The strategy seeks to address five key components:

  1. Level of competitiveness (e.g., target is to be the median of the market),
  2. What structure should apply (e.g., base salary + short and long term incentives);
  3. The role performance plays (e.g., base pay increase depends on individual performance);
  4. Approach to communication (e.g., a level of transparency so employees know how their pay is determined); and
  5. How remuneration integrates as part of total reward (e.g., remuneration is one component of a total employee reward offering)

Addressing each of these components supports the company’s employee value proposition (EVP) to current and future employees. That is, the overall package being offered up to employees in exchange for their skills and talents.  A document such as Remuneration Policy helps to codify the strategy including the rationale behind what, why and how remuneration and reward elements are provided across the organisation.

And, like any other business strategy, it is adopted to help meet a need or achieve a goal.


What is total reward?

In today’s world of work, organisations are realising that a ‘fair days pay for a fair day of work’ is no longer enough to engage the aspirations and demographics of employees. Enter ‘total reward’ where organisations use interdependent reward elements (remuneration, benefits, career development, and work / life) to align with business priorities.

total reward chart

Why is it important to have a remuneration strategy?

You can’t build an empire on your own, and many company leaders admit that it’s their people who make the difference. When a business target is set, it’s often through teamwork, efficiency, innovation, breakthroughs and consistency that success is ultimately achieved. For this, you need great people who are focussed, engaged and striving to do their best work each and every day.

But how do you motivate someone to continually do their best work when their remuneration and reward is always the same, whether they’re kicking goals every day or just showing up and hanging out by the water cooler? This question is especially important when speaking of the management, executive and C-Suite team members who play large roles in the direction and performance of the company.

The time-based pay increase model aligned to inflation is an outdated way of approaching remuneration. It doesn’t provide incentive for staff to strive, innovate and certainly doesn’t have any ‘ROI’ for the business. Consequently, your employees may be focusing their efforts on tasks that don’t promote business growth, contribute to company culture or work towards achieving company ideals.

A well-developed remuneration and reward strategy aligned to key business objectives can steer your workforce toward the greatest of company needs, but in a way that benefits them. This way everybody wins.

The following visual provides an example pathway when developing a remuneration and reward strategy to support a key business objective.

remuneration strategy flow chart

Companies that demonstrate their attention to providing an attractive overall package for prospective employees are viewed as more desirable places to work.

Consider the difference between these two workplaces. Which would be a more attractive choice for top industry talent?

Company A Employee Value Proposition Company B Employee Value Proposition
  • Base salary
  • Superannuation guarantee
  • 4 weeks annual leave
  • Discretionary bonus
  • Base salary
  • Superannuation guarantee + salary sacrifice matching
  • 4 weeks annual leave + extra leave purchase plan
  • Award and recognition program
  • Structured incentive plan tailored for employees and executives
  • Flexible hours and working arrangements
  • Employee share scheme
  • Formal career path
  • Employee assistance program
  • Gym membership subsidy
  • Shower and change facilities for employees to use after exercise
  • Employee recreation lounge

You will notice that not all of these programs involve upfront financial investment and yet, provide meaningful reward. For example, award and recognition provides a simple yet powerful program for all employees to say and receive ‘thanks’. Staff that contribute to achieving major milestone project and those who are such great team players can be all acknowledged for their efforts which are critical for the success of the company.

How a remuneration strategy can benefit your company

A remuneration and reward strategy can;

Help you attract and keep top talent
Skilled and talented workers, star team players, great leaders and change makers are naturally going to go and stay where they are appreciated. When a workplace goes the extra mile to afford workers great working arrangements and quality of life, that most often translates to loyalty, high performance and even long-term outlook.

Increase productivity and engagement
In knowing that their hard work will be acknowledged in meaningful ways, employees are more likely to produce quality work. In turn, your business receives high ROI.

Improve performance and development
Many companies use performance management systems to improve and grow the performance of employees. This can involve performance reviews and the setting of objectives and key results. Aligning remuneration strategy to performance management can further strengthen discretionary effort and employee engagement.

Contribute to strong, positive company culture
The way talent and achievement is acknowledged and celebrated plays a big role in the mood of the workplace. It also promotes other positive sentiments like pride and genuine loyalty.

Achieving any or all of these outcomes have been shown to contribute to grow the bottom line and will build your company’s reputation as a great place to work.


The Reward Practice is an independent remuneration consultancy that specialises in developing fit-for-purpose remuneration strategies, incentive plans and employee reward programs for businesses of all sizes and stages.

Contact us today for a discussion on how a customised remuneration and reward strategy can help your business.


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