Reward strategy toolkit

Use this toolkit to develop a succesful reward strategy for your organisation.

26 May 2021

The reward strategy toolkit has been designed to help employers to develop and implement a reward strategy. A holistic reward package should be offered to staff which will improve employee engagement and organisational performance.

The toolkit is broken down into three phases. You may not follow each phase in sequence, depending on your current situation. We have developed a quick guide to lead you through the three phases of the reward strategy toolkit.

  • Phase 1 - preparation and planning
  • Phase 2 - development and design
  • Phase 3 - implementation and communication

Why do we need a reward strategy?

Reward can be both financial and non-financial and can be used to attract, recruit, and retain staff. A holistic reward package should be administered to staff across your organisation via an effective reward strategy.

The NHS People Plan sets out that there will be an increase in recruitment, to roles ranging from entry level jobs to senior clinical, scientific and managerial roles. Employers need to promote the NHS and its rewards as an attractive proposition to encourage the highest-calibre candidates to apply. Employers want the NHS to be the best place to work.

Ensuring you are taking a researched, planned and monitored approach to rolling your reward package is key to ensuring it has the intended maximum impact.

Adopting a strategic approach to reward could provide you with an opportunity to better communicate your employment package, improve awareness of its value, improve employee engagement and organisational performance.

  • Before developing a new strategy, it is essential to have laid foundations which will enable a logical, organised and sustainable approach to reward strategy development. This phase sets out the steps you can take.

    Understanding organisational and employee needs and drivers

    During the preparation phase it is useful to revisit some of the information relating to the organisation’s goals and objectives.

    When reviewing the organisation's needs and drivers you should review and consider:

    • strategic objectives
    • key performance goals
    • core skills, values and behaviours required to deliver these
    • current reward strategy
    • workforce plan.

    Employee needs and drivers

    When reviewing your employee needs and drivers you will need to understand:

    • how engaged your staff are
    • what they like and dislike about your current reward offering
    • what they might value in future reward offerings.

    It is important to understand what employees’ motivations and needs are and how they vary at different levels and in different parts of the organisation. The NHS People Plan requires employers to foster a culture of inclusion and belonging.

    Gaining an understanding of how engaged staff are, what they think of the current reward package and possible changes to it, is important to ensure that any strategy meets their expectations. Ideally this data should be split to include areas such as function, pay band, and demographics.

    The NHS staff survey includes information on some aspects of how staff feel about their total rewards, such as the recognition and development they receive. Some employers have additionally surveyed their staff specifically for views on their total rewards.

    Once you have reviewed and considered all of the information the next step is to ensure you have a clear overview of your current reward offering.

    Reviewing your current reward offering

    It is a useful exercise to take stock of your current reward package. The obvious starting place is your pay, pensions, and flexible rewards package.

    As well as these tangible benefits, it is useful to detail the intangible benefits that you are also offering, such as work-life balance and the opportunity for growth and development.

    External market context

    Now look at the external labour markets to consider how competitive your current strategy is.

    Some questions that will need to be considered are:

    • What practices and changes are evident amongst labour market competitors?
    • What are other NHS employers doing?
    • How much flexibility within the national agreements is being deployed?

    Additionally, reviewing the political and legal context to examine if there are any legal changes likely to affect your rewards and employment package will be relevant.

    Reviewing the data

    There are a number of ways of analysing and making sense of the wealth of information you have collated. The data that you have collected will determine which form of analysis to take. This website may help you identify which method is most relevant for you.

    Reward principles and goals

    The work undertaken in the preparation phase will provide the foundation to identify what your reward strategy objectives are and which of these are a priority. You should also consider how your reward principles and goals reinforce your patient care goals, business goals, and staff needs.

    Common reward strategy goals will:

    • support the delivery of organisational goals
    • aid the recruitment and retention of high calibre staff
    • encourage teamwork
    • reinforce the relationship between performance and reward
    • motivate and engage employees
    • deliver a cost-effective reward offering.

    To achieve these goals, the strategy should:

    • be communicated effectively to all staff
    • be easy to access
    • be easy to administer
    • be adaptable to the changing needs of the organisation and employees
    • demonstrate a clear alignment with organisational values and behaviours.

    A commonly used tool to highlight reward goals and priorities is a reward objectives matrix. This can be used to list the identified reward strategy goals which can then be rated in terms of importance.

    This exercise can be led by your project team and carried out by a variety of stakeholders, such as the board, line managers, and other key stakeholders either individually or within a group. It is important when completing this exercise to encourage differentiation between the goals and to not rate every goal as a ‘10’. Also ask the stakeholders to rate the extent to which these objectives are currently delivered. This can start to indicate any major gaps between current practice and desired rewards.

    The results from this exercise can then be compared which helps to indicate the overall priorities and the consistency of opinions.

    Understanding current reward effectiveness

    Once the principles and objectives for your reward strategy have been identified, it is useful to define the standards against which your current rewards should be measured. The next step is to establish how far your current reward offering is from these goals. This will help you identify how much change you are likely to want to introduce and where improvements can be implemented. Two useful tools to approaching this are SWOT analysis and gap analysis.

    SWOT analysis

    Strengths, weaknesses, opportunities and threats (SWOT) analysis is a tool that many people are familiar with and it can easily be applied to each aspect of pay and reward to help employers arrive at an overall summary of the current situation, and if weaknesses and threats are significant, pointing to required changes.

    Gap analysis

    Stakeholders are individually invited to mark the current and desired positioning on some key goals of reward, market positioning, emphasis on pay and benefits and levels of consistency. Scores can then be summed and compared to highlight the areas where the most change is indicated, which have the largest gaps, as well as the consistency of stakeholder views.

    Developing your reward business case

    It is vital to the success of the strategy that you have ‘buy-in’ and approval from your board and other key stakeholders. Making and detailing the business case specific to your individual employer situation, based on the work you have carried out so far, is necessary for your board to understand and support the strategy and its contents.

    Ways to set out your approach can include a strategy document, a presentation, or a business case document. Whichever approach you take forward, there are certain items you will need to address. One way of helping to arrive at your final strategy document is to work through a checklist of key questions and statements.

  • Phase two examines the development and design of your reward strategy. Depending how much change was indicated by phase one you may simply need to improve how your current reward offerings are managed and communicated. However, it is likely you will want to make greater use of the flexibilities available in the national agreements and develop alternative, or improved, reward practices and designs to better achieve your reward principles and goals. More detailed information on those are linked below.

    Use our checklist to help you identify the key actions to take in phase two.

    Once you have completed the development and design phase of the toolkit you will have agreed a cohesive and robust reward strategy that will improve the effectiveness of reward policies across the organisation. You will be ready to plan for the final phase, implementation and communication.

    Agenda for Change flexibilities

    Local employer flexibilities available with Agenda for Change. These flexibilities came into effect March 2013.

  • Through the development and design phase of the toolkit you will have identified and assessed which elements of reward will best support the delivery of your reward principles and goals.

    In phase three there are four key areas to consider:

    1. Testing your approach
    2. Developing your implementation plan
    3. Managing the change
    4. Developing a communications strategy – our communications guide for reward will help with this.

    Use our checklist to help you identify key actions while you are working through phase three.

    If you would like any support with your reward strategy, please email

Top tips for developing a reward strategy

Many organisations may not realise the full benefit of their reward package for staff, in particular by not promoting what's available to staff. By taking a strategic approach to reward, organisations can ensure their reward package is better communicated throughout their organisation.

Watch our film which shares top tips on how to develop a reward strategy, from leaders across the NHS and other sectors.