Your Employees Don’t Understand Their Total Rewards—and It’s Costing You
The Communication Paradox: Better Informed, Less Satisfied
A counterintuitive trend is emerging in today’s workplaces: employees feel better informed about their benefits than ever, yet satisfaction is declining. WTW’s latest EX Intelligence report found that 84% of employees feel well informed about company benefits, up from 77% the previous year, while satisfaction fell from 66% to 61% over the same period. [1]
This paradox highlights a critical truth: information is not the same as understanding. Organizations invest millions in benefits, but employees often fail to recognize the value they receive. That gap may not appear on the balance sheet, but its effects are visible across the business.
The Perception Gap: What Employees See Versus What Employers Provide
The disconnect between employer investment and employee perception is well documented. Research consistently shows that fewer than half of employees understand how their pay is determined, and only a small share can clearly explain how pay ranges work. According to the Society for Human Resource Management, more than half cannot explain how their pay is set. [4]
This gap matters because total rewards create meaningful value only when employees understand them. When employees do not understand how pay decisions are made or what their total rewards package includes, trust weakens, engagement falls, and retention becomes harder.
The issue extends beyond pay. Many employees equate “compensation” with take-home pay and overlook the broader package: benefits, development opportunities, wellbeing support, flexibility, and long-term incentives. As one industry expert observed, “it’s naive to think that employees think of [total rewards] that way.”
What Is Driving the Disconnect
Several forces have combined to widen the perception gap:
The transparency revolution. Employees now have unprecedented access to salary data through platforms such as Glassdoor and LinkedIn. Pay-transparency legislation is also expanding worldwide: 77% of organizations are developing transparency strategies, but only 14% have fully implemented them. [2] When employees can access external data but receive poor communication from their employer, transparency erodes trust instead of strengthening it.
Communication breakdowns. HR teams repeatedly face information overload, inconsistent messages from leaders, and technical language employees struggle to interpret. Communication is often one-way and lacks context. As one observer noted, “The tools companies use to communicate total rewards… weren’t designed with a ‘total rewards’ mindset; they’re just static repositories of information.”
Manager unpreparedness. Managers are the frontline ambassadors of pay transparency, yet many “become nervous when confronted with a compensation discussion.” Some cannot explain the reasoning behind decisions; others fear emotional reactions. Because many managers are promoted for technical expertise rather than communication ability, they may lack the vocabulary to discuss equity, bias, or market data.
The Business Cost of Undervalued Benefits
When employees do not understand their total rewards, the effects compound across the organization:
Eroding trust. Employees who view their pay as unfair are less engaged and committed. Mercer found that employees who consider their pay fair are 85% more engaged and 60% more committed. [2] Without understanding, mistrust, disengagement, and frustration increase.
Higher turnover risk. Pay transparency can increase turnover when employees perceive unfairness, but reduce it when they perceive fairness. Understanding is the key variable. Employees who understand the reasoning behind a decision are “eight times more likely to consider [a decision] fair, even if they don’t agree with the amount.” Without that context, top talent may leave.
Wasted benefits spending. Organizations invest heavily in benefits, but that investment remains invisible when employees do not understand it. WTW found that satisfaction with non-monetary benefits rose from 61% to 66%, suggesting employees increasingly value the broader rewards package, but only when they know it exists. [1] As WTW’s Gaby Joyner said, “Employees may better understand their benefits, but that doesn’t mean those benefits are truly serving them.” [1]
Greater HR and manager workload. When employees do not understand their rewards, HR teams handle more compensation-related questions and escalations, while managers spend time answering repeated queries instead of leading their teams.
Building an Effective Total Rewards Communication Strategy
Organizations that close the perception gap tend to follow similar practices. Deloitte’s research on High-Impact Total Rewards found that mature organizations are 2.4 times more likely to communicate both the full value and actual cost of their total rewards offerings. [3]
Begin with a clear narrative. Effective communication addresses the questions employees actually ask: Am I paid fairly? How are pay decisions made? What growth opportunities are available to me? Which benefits fit my needs? A strong total rewards narrative explains what the organization offers, why it offers it, how decisions are made, and what employees can expect next.
Tailor messages to each audience. Executives need concise information focused on principles and risks. People leaders need enough context to explain decisions credibly. Individual contributors need clear, foundational guidance on pay ranges and how benefits work together. A one-size-fits-all approach serves no one well.
Prepare managers for meaningful conversations. Managers are often the first people employees approach about salary ranges, Glassdoor comparisons, or perceived inconsistencies. Organizations should build manager capability through role-playing, FAQs, scenario scripts, and regular refreshers, not one-off workshops. Markel, for example, retrains leaders months before compensation cycles on pay philosophy, salary ranges, and questions arising from online comparisons.
Use technology to build understanding, not merely distribute information. Mature organizations are 4.1 times more likely to offer easy-to-use, self-service rewards technology. [3] Centralized platforms can give employees convenient access to compensation details and the policies behind pay decisions. However, the experience must be intuitive and engaging and not a “clunky HR benefits portal” that no one uses.
Measure understanding, not just awareness. WTW’s data shows that feeling “well informed” does not guarantee satisfaction. [1] Organizations should assess whether employees truly understand their total rewards, not simply whether information was delivered. Employee feedback, participation trends, and benefits usage can reveal what different groups value most.
The Cost of Inaction
The gap between what organizations invest in total rewards and what employees recognize is more than a communication problem. It is a strategic vulnerability that weakens trust, engagement, and retention. In a competitive talent market, organizations that fail to explain total rewards leave value unrealized and pay for it through turnover, disengagement, and mistrust.
Closing this gap does not necessarily require more spending; it requires better communication. As WTW’s Gaby Joyner observed, forward-looking leaders are “uncovering which benefits drive satisfaction and retention, often without increasing spend.” [1] The investment is in clarity, not cost.
Organizations that treat total rewards communication as a strategic priority rather than an administrative afterthought can achieve measurable gains: stronger engagement, better retention, and a workforce that understands—and values—what it receives.
References
1. WTW. (2025, December 1). Employees are more informed, but less satisfied with benefits, says WTW. WTW.
2. Mercer. (2026, February 16). As pay transparency regulations come into force globally, only half of employers say they are prepared, according to Mercer. Mercer.
3. Deloitte. (2025, April 16). High-Impact Rewards: The end of information asymmetry. Deloitte Insights to Action.
4. Society for Human Resource Management. (2024, January 27). The real effects of pay transparency in business. SHRM.
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