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Authors: Jon Anderson Tammy Olson Matthew Whitson

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Following this phase of renewal fatigue, the conversation around the overall rewards is subtly shifting from how much budget is spent to how effectively allocated resources are used and the value to both the employee and organization.

Against this backdrop, total rewards become a natural point of recalibration. Redefining it now, through an insight-driven, inclusive framework, allows organizations to balance the cost with care and credibility — a defining advantage in today's discerning talent market.

Unlocking the full potential of the employee value proposition

The 2026 year marks the beginning of a more deliberate reset in the world of work. While the past five years forced organizations into a series of reactive shifts driven by significant labor market turbulence, in 2026 salary budgets are stabilizing, and return to office expectations are finding their rhythm. AI-native skills are reshaping roles across every function.

As this new equilibrium takes shape, cost-per-employee reward strategies are coming into sharper focus. Employees are reassessing the full value of their benefits package: Wellbeing, flexibility, security and growth are increasingly viewed as being as lucrative as pay. For HR leaders, the shift is from expansion to precision and tangible return on investment (ROI) — a trend echoed in Gallagher's 2025 Q4 Organizational Wellbeing Poll, where cost optimization rose in priority throughout the year.

With this shift, the employee value proposition (EVP) plays a central role. While many organizations have well-defined rewards programs and robust learning strategies, the employee experience often remains fragmented. Such siloed strategies dilute perceived value, with the risk of delivering impact only after employees have made their stay-or-go decisions.

Leading organizations are addressing this by reframing the EVP as a strategic lever for the whole-person approach, ensuring total rewards are aligned with business ambitions and consistently reinforced during those life moments that matter most.

"An effective value proposition connects the rewards offered on paper with workforce expectations and organizational goals and ambitions," observes Matthew Whitson, managing director of Compensation Consulting at Gallagher. "When these elements are aligned, organizations are better positioned to attract, engage and retain talent that drives lasting business impact."

Redefining the baseline: The 5 foundations of a modern total rewards strategy

One of the strongest pull factors for employees today is how holistic and connected their "rewards" experience feels — that expectation is reshaping what total rewards must deliver. A convergence of economic, workforce and technological shifts is also challenging organizations to rethink the structure of how these benefits are packaged.

Redefining the EVP requires a fresh look at how the total rewards package can deliver meaningful value in real time, not just over the long term. "Long-term strategies may take years to show results," says Tammy Olson, vice president, Benefit Strategies at Gallagher. "Yet workforce expectations have shifted toward more immediate support, which makes a rewards reset both timely and necessary."

For any total rewards strategy to flourish, the weighting of each reward component is best defined by individual industry context, workforce segments and specific retention drivers. It boils down to the following five core elements for a best-in-class approach:

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Workforce expectations have shifted toward more immediate support, which makes a rewards reset both timely and necessary.
Tammy Olson, vice president, Benefit Strategies, Gallagher

Communication: Addressing the "why'' in total rewards

Communication is an essential cornerstone of any holistic rewards strategy. Transparency also builds employer trust, strengthens retention and enables organizations to lead the narrative.

The importance of the "why" was in evidence when Gallagher helped one particular organization make difficult rewards decisions. In this scenario, program modifications impacted take-home pay, bonus structures and healthcare premiums.

Our recommendation was to initiate communications well in advance. Taking a phased, tapered approach to bonus payout ensured employees were supported through the change, with minimal disruption. "Pairing transparency with empathy enabled the organization to implement a respectful, successful transition," notes Whitson.

With a thoughtful, well-executed communication strategy, organizations can navigate even the most complex total rewards changes. Explaining the rationale for change is crucial, but equally important is clearly articulating the value of available benefits. Whitson adds, "This ensures the benefits are understood, utilized and valuable investment dollars are not left on the table."

Start with alignment, succeed with data benchmarking

Getting your total rewards strategy right has to start at the top. As Olson emphasizes, strong top-down buy-in ensures alignment with organizational priorities and creates conditions to tailor rewards and drive sustainable impact.

A positive step in this direction is having the right benchmarking to measure success. Indeed, the ability to see data in action helps organizations visualize their ROI in real time and manage expectations when results are not immediate.

Too often, well-intentioned strategies fall short because of unrealistic timelines. Execution matters as much as design. "A meaningful total rewards transition is typically multi-year in nature," notes Jon Anderson, Gallagher Drive consultant. "This typically requires flexibility, collaboration and a willingness to continually assess how different reward components interact."

"Which is why grounding strategies in benchmarking is essential. The data story ensures organizations can pivot when needed to strengthen their long-term strategy," he adds.

And yet, we see a worrying, persistent gap in benchmarking: very few organizations actually measure whether their strategies are working — only 16% have KPIs in place to track benefits performance, according to Gallagher's 2025 Q4 Organizational Wellbeing Poll.

Ultimately, organizations that take a step back, stay aligned and commit to thoughtful execution are best positioned to reset the value equation. In doing so, total rewards become more than a strategy: a durable source of trust, relevance and performance over time.

Seen through this lens, the conversation shifts from individual benefits to a broader experience. When an employee takes leave, for example, the whole reward system works together to support, rather than benefits operating in isolation.

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Grounding strategies in benchmarking is essential. The data story ensures organizations can pivot when needed to strengthen their long-term strategy.
Jon Anderson, consultant, Gallagher Drive

As organizations rethink how they deliver value, one thing becomes clear: A reset isn't about refining rewards but about rising to evolving employee expectations.

Want to optimize your risk management, insurance programs and employee benefits strategies? Contact us to learn more about Gallagher Drive, our proprietary data analytics platform.

Author Information

Jon Anderson

Jon Anderson

Consultant, New Business Intelligence, Gallagher Drive

Disclaimer

This material was created to provide information on the subjects covered, but should not be regarded as a complete analysis of these subjects. The information provided cannot take into account all the various factors that may affect your particular situation. The services of an appropriate professional should be sought regarding before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.

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