For HR leaders: What to consider when designing a total rewards package

Most HR leaders spend months building what looks like a competitive benefits package, only to watch utilization flatline at open enrollment and hear the same feedback at exit interviews: "I just felt like I wasn't being compensated fairly." The problem usually isn't the budget. It isn't even the individual benefits.

It's that most packages are designed around assumptions about what employees want, how they'll interact with benefits, and whether they'll even know what's available. If those assumptions are wrong, the gap between what a company spends and what employees actually perceive as valuable quietly widens. And that gap is where total rewards strategies fall short.

If you’re on an HR team tasked with creating a total rewards package that aligns with business priorities and that your employees will genuinely value, here’s everything you need to know.

Key takeaways

• A total rewards package spans compensation, benefits, development, recognition, and well-being — not just salary.
• Total rewards, total compensation, and employee benefits are related but distinct terms; confusing them causes HR teams to undersell the real value of their programs.
• The most common design failures aren't about budget — they're about visibility, tax structure, platform fragmentation, and one-size-fits-all population assumptions.
• Sharing an annual total rewards statement with each employee closes the perception gap between what companies spend and what employees believe they receive.
• Forma's flexible benefits platform helps HR teams design, consolidate, and manage personalized total rewards programs at scale. Schedule a demo to learn more today.

What is a total rewards package?

A total rewards package is the complete set of monetary and non-monetary value an employer provides in exchange for an employee's work. It goes well beyond a paycheck to include health benefits, retirement contributions, paid time off, career development, recognition programs, and well-being support. 

The goal is to reflect the full value of the employment relationship and not just the salary line on an offer letter.

HR teams use a total rewards strategy as a framework for making benefits decisions that align with both business goals and real workforce needs. When it's working, it positions a company as a place where people want to build careers, not just collect a paycheck.

Total rewards vs. total compensation vs. employee benefits

These three terms are used interchangeably in most HR conversations, but they describe meaningfully different things. Knowing the distinction helps HR communicate more credibly with finance teams and leadership when making the case for benefits investment.

• Total compensation: The full monetary value an employee earns, including base salary, bonuses, commissions, equity, and any other cash-equivalent payments. It is a subset of total rewards.
• Employee benefits: The non-monetary or tax-advantaged value provided alongside compensation. This includes health insurance, retirement plans, paid leave, FSAs, HRAs, wellness stipends, and similar programs. Also a subset of total rewards.
• Total rewards: The umbrella term. It includes total compensation and employee benefits, plus intangible elements like career development, recognition, workplace culture, and scheduling flexibility. It is the broadest view of what an employee receives from the employment relationship.

When HR teams conflate these terms, they tend to undersell the actual value of what they offer, especially to candidates who benchmark only against salary figures posted in job listings.

What most HR teams get wrong when designing total rewards

Most guides on this topic will tell you to align rewards with business goals, survey your employees, and benchmark against competitors. Those aren't wrong steps but they describe inputs, not the actual design failures that cause programs to underperform. 

The considerations below are the ones that tend to separate high-utilization programs from expensive ones that employees don't feel.

1. Benefit invisibility is a design problem, not just a communications problem

When employees don't know what benefits they have, most HR teams respond by adding more email touchpoints or scheduling extra open enrollment webinars. But invisibility is usually a design failure upstream of the email. 

If employees have to log into four separate portals to find their wellness reimbursement, commuter benefit, FSA balance, and tuition assistance, most won't bother. They'll assume they don't have it.

The access layer, how employees find, understand, and use their benefits, determines perceived value more than the dollar amount behind it. A $500 benefit that requires 20 minutes of claims paperwork will feel less valuable than a $200 benefit that processes automatically. Design the experience as carefully as you design the budget.

2. Tax structure is the highest-ROI lever most HR teams ignore

Routing benefits through tax-advantaged accounts like HSAs, FSAs, commuter benefits, and HRAs doesn't just reduce employee tax liability. It reduces employer payroll taxes as well. Every dollar run through a pre-tax benefit account lowers FICA obligations on both sides of the ledger, which means a well-structured benefits package can deliver more perceived value per dollar spent than a straight salary increase.

Most HR teams focus on which benefit categories to offer and miss the structural opportunity entirely. If a total rewards strategy isn't explicitly accounting for tax treatment at the design stage, the program is likely leaving cost savings on the table while underdelivering employee value at the same time.

3. Designing for the median employee creates maximum dissatisfaction

A package optimized around the "average" employee will feel irrelevant to most of the workforce at the edges. An early-career employee managing student debt has fundamentally different needs than a senior manager with a mortgage, school-age children, and aging parents to support. A remote employee in Austin and an office-based employee in Manhattan need different commuter, childcare, and lifestyle support structures.

When benefits are too homogeneous, utilization naturally clusters among the small subset of employees who happen to fit the assumed profile. Flexible benefits programs solve this by letting employees direct spending toward what actually matters to them, rather than using or losing a benefit designed for someone else's life.

4. Point solution sprawl undermines utilization before it starts

Companies managing eight or more separate benefit vendors, a gym partnership here, an EAP there, a standalone FSA administrator, a separate commuter card, a tuition reimbursement portal, create compounding friction for employees. 

Each additional platform is another login to remember, another claims process to work through, and another communication employees have learned to tune out.

Fixing point solution fatigue is one of the most searched topics among benefits leaders for a reason: fragmentation is one of the primary causes of low utilization, and it's entirely self-inflicted. 

Consolidating benefit programs onto a single platform, where employees can check all balances, make claims, and spend through a single card, removes the friction that's quietly preventing real engagement.

5. Utilization data is more honest than employee surveys

Annual benefits surveys tell you what employees say they value. Utilization data tells you what they actually use. These two signals rarely match up, and designing purely based on stated preferences while ignoring behavioral data is how companies fund the same underperforming programs for years.

If a gym subsidy has a 12% claim rate, that's a signal worth reading. It might mean employees don't want gym access or it might mean the reimbursement process is too cumbersome to bother with. Real-time benefits utilization analytics help HR teams make that distinction, re-allocate budget toward programs employees genuinely engage with, and defend spending decisions to finance using behavioral metrics rather than survey percentages.

6. Global workforces need cost-adjusted equity, not dollar parity

A $500 annual wellness stipend is a meaningful benefit in some markets and a rounding error in others. Companies that set flat dollar amounts for global benefit programs without adjusting for cost of living create unintentional compensation inequity across their workforce. 

Employees in higher cost-of-living markets feel underserved, while flat amounts in lower-cost markets can exceed local norms and trigger unexpected tax complications.

True benefit equity requires cost-of-living adjusted funding alongside the ability to handle local currency conversion, local tax rules, and local eligibility requirements. For companies managing global employee benefits programs, this is one of the most overlooked design variables — and one of the most impactful for retention in international markets.

Design consideration

What it means in practice

Common mistake to avoid

Benefit visibility

Design the access experience, not just the benefit list

Treating low awareness as a communications problem only

Tax structure

Route benefits through pre-tax accounts to reduce FICA for both parties

Ignoring tax treatment when calculating true cost per benefit

Population assumptions

Build for distinct workforce segments, not an average employee

Homogeneous programs that feel irrelevant to most employees

Platform fragmentation

Consolidate vendors to reduce friction and improve utilization

Managing 8+ point solutions with no unified employee-facing experience

Utilization data

Let behavioral engagement data guide redesign decisions

Relying on surveys while ignoring actual claim and spend rates

Global equity

Adjust benefit values for cost of living, not just currency conversion

Applying flat dollar amounts uniformly across all markets

The real payoff of a well-structured total rewards program

A well-designed total rewards strategy doesn't just strengthen recruitment pitches. It changes the day-to-day experience of working at a company in ways that compound over time in retention numbers, productivity rates, and the employer brand that candidates talk about before they ever apply. 

The payoff is real, but it only materializes when the program is built to be used, not just offered.

Employees who feel seen by their benefits stay longer

Retention isn't driven by salary alone. When employees perceive their benefits as personally relevant, not generic or inaccessible, they are significantly more likely to stay. The perceived value of a total rewards program is directly tied to how well it fits the employee's actual life, not how impressive the list of benefits looks in an onboarding document.

This is why personalization has become a retention strategy, not just a design preference. A flexible benefits strategy that lets employees direct spending toward their own priorities consistently outperforms fixed benefit menus in utilization, satisfaction scores, and long-term retention impact.

Productivity gains are measurable, not theoretical

Financial and personal stress are among the most reliable productivity killers in the modern workforce. When employees are worried about money, dependent care, or their physical well-being, that cognitive load follows them into the workday. 

Benefits programs that address these stressors directly, rather than offering a generic list of optional perks, create the conditions for employees to actually focus on their work.

Employee wellness programs with measurable ROI consistently show reduced absenteeism, stronger engagement scores, and lower turnover costs when programs are designed around what employees actually need and structured to be easy to use.

Total rewards statements close the perception gap

One of the most well-documented patterns in HR is that employees consistently underestimate the full value of what they receive. They benchmark their "compensation" against job listings that show salary, not against the total cost an employer carries on their behalf. 

A company spending $22,000 per year on salary and an additional $12,000 in health coverage, retirement contributions, PTO, and wellness programs may have employees who genuinely believe they're underpaid.

Total rewards statements are documents shared annually, typically during performance reviews or open enrollment, that itemize and quantify every element of what an employee receives. They break down salary, bonus, insurance premiums, retirement contributions, wellness allowances, PTO value, and other employer-funded benefits into a single transparent view.

Companies that share these statements consistently report higher benefits satisfaction scores, not because the package itself changed, but because employees finally see the full picture. When a company has invested in a competitive program and isn't communicating that investment, the perception gap is a measurable miss. The statement doesn't need to be elaborate; it needs to be honest and complete.

Innovative approaches to total rewards in the modern workplace

As the nature of work changes, so should the design logic behind total rewards. Traditional benefits alone are no longer enough to attract and retain strong performers. Employees today expect programs that adapt to their lives rather than forcing them to adapt to program constraints.

Offering flexible and personalized benefits options

A one-size-fits-all approach to benefits is a design constraint, not a cost-saving measure. Employees have different priorities based on their life stage, location, and personal goals. Offering customizable benefits gives employees real agency over what their compensation actually does for them. Options worth building into a modern total rewards program include:

• Pre-tax spending accounts for health, wellness, or dependent care that let employees allocate funds where they see the most value
• Modular benefits plans where employees select from a range of options, including additional PTO, enhanced healthcare, or commuter support
• Lifestyle Spending Accounts that cover a wide range of eligible expenses — from fitness and travel to professional development and family support

When employees feel their benefits were designed with someone like them in mind, engagement and retention both improve. That's not a soft outcome — it shows up in utilization data and turnover costs.

Incorporating well-being and work-life balance

Workplace well-being has shifted from perk to expectation. Employees now evaluate employers on whether they actively support physical, mental, and financial health as part of the compensation structure. Companies that build well-being into total rewards see measurable returns in reduced absenteeism and stronger engagement. Some effective approaches include:

• Mental well-being support through EAPs, therapy access, or mindfulness tools
• Fitness and nutrition programs supported through wellness stipends or reimbursement
• Flexible work arrangements that let employees manage responsibilities inside and outside of work
• Family-oriented benefits such as paid parental leave, childcare stipends, and eldercare assistance

Recognizing and rewarding individual contributions

Recognition is a high-impact, often underfunded component of total rewards. Employees who feel their contributions are seen and acknowledged are more likely to stay engaged and less likely to begin quietly shopping for other opportunities. Structured rewards and recognition programs that move beyond an annual bonus might include:

• Peer-to-peer recognition tools that let employees acknowledge each other's contributions in real time
• Performance-based spot bonuses tied to specific outcomes rather than calendar cycles
• Career milestone acknowledgments, work anniversaries, project completions, promotions, that feel personal rather than automated

Fostering continuous learning and development

Employees increasingly weigh career growth potential when evaluating whether to stay at or join a company. A workplace that actively supports skill development retains people who are growing in their roles and has a stronger internal pipeline for leadership. Effective learning investment looks like:

• Formal training programs, leadership tracks, and technical certification support
• Tuition reimbursement or educational stipends that reduce the financial barrier to continuing education
• Internal mobility programs that create clear progression paths rather than forcing ambition to look externally

How Forma helps HR teams build programs employees actually use

Building a total rewards program that performs requires more than a strong benefits list. It requires a platform that makes the experience of using benefits as seamless as the experience of earning them. Forma's flexible benefits platform centralizes Lifestyle Spending Accounts, pre-tax accounts, HRAs, commuter benefits, and rewards and recognition into a single admin dashboard and a unified employee-facing experience.

HR teams get real-time utilization analytics, automated claims processing, and compliance management across 100+ countries. Employees access all their balances in one place, spend through the Forma Visa Card, or submit claims with 24/7 human support. Companies that consolidate onto Forma don't just reduce administrative overhead. They see utilization rates that consistently outperform fragmented point-solution stacks.

Schedule a demo today to see what a consolidated, high-utilization benefits program looks like in practice.

Frequently asked questions about designing a total rewards package

What is the difference between total rewards and total compensation?

Total compensation refers only to monetary earnings — base salary, bonuses, commissions, and equity. Total rewards is the broader category that includes total compensation plus all non-monetary value: benefits, paid leave, career development, recognition, and workplace culture. The distinction matters because most employees benchmark against salary, so communicating the full total rewards picture closes a significant perception gap.

How often should a total rewards package be reviewed?

Most HR teams review total rewards annually, typically ahead of open enrollment. That cadence is a floor, not a ceiling. High-growth companies or those experiencing turnover in specific roles should review relevant components more frequently. Utilization data, exit interview patterns, and changes in workforce demographics are all signals that a mid-cycle review may be warranted.

What is a total rewards statement, and when should HR share it?

A total rewards statement is a document that itemizes and quantifies everything an employee receives from their employer like salary, benefits, retirement contributions, PTO value, wellness allowances, and more. Most companies share them annually during performance reviews or open enrollment. Employees who receive these statements consistently report higher satisfaction with their compensation, even when the package itself hasn't changed.

How do you design a total rewards package that works for a global workforce?

Flat dollar amounts applied uniformly across countries create real inequity. Effective global total rewards design accounts for cost-of-living differences, local tax treatment, currency conversion, and region-specific benefit norms. It also requires a platform that can handle local compliance and eligibility rules without requiring HR to manually manage exceptions market by market.

How do you measure whether a total rewards strategy is actually working?

The most reliable signals are utilization rates, voluntary turnover, offer acceptance rates, and employee net promoter scores. Benefit utilization is especially telling — it shows what employees actually engage with, not just what they say they value in surveys. Companies that track these metrics quarterly can reallocate underperforming benefit dollars before a full annual cycle passes.

What is the biggest reason total rewards programs underperform?

Fragmentation. Most underperforming programs aren't underfunded — they're inaccessible. When employees have to navigate multiple portals, remember multiple logins, and navigate multiple claims processes, they disengage before they ever use what's available. The access experience determines utilization more reliably than the benefit dollar amount behind it.

Should mid-size companies invest in a formal total rewards strategy?

Yes and the ROI case is stronger for mid-size companies than it may appear. At 500 to 2,000 employees, turnover costs and competitive hiring pressure are real, but budgets are constrained enough that maximizing the perceived value of every dollar spent on benefits matters significantly. A formal total rewards framework helps mid-size teams avoid spending on low-utilization programs and redirect investment toward what actually moves retention and engagement.

This document is for informational purposes. Forma is not engaged in the practice of law. Nothing contained herein is intended as tax or legal advice nor to replace tax or legal advice from counsel. If you need tax or legal advice, please consult with counsel or a certified tax professional.

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