How do we decide our approach to reward? A practical guide to reward strategy

08th June 2026

Julia Hanna

I’ve spent more than 20 years helping organisations develop reward strategies, benchmark pay and design job architecture frameworks. In this series, I answer some of the most common questions I hear from HR and business leaders.

Every organisation has a reward strategy. The only question is whether it’s written down.

When I ask leadership teams about their reward strategy, they often point me towards their pay structure, bonus scheme or benefits package. But those things aren’t a reward strategy. They’re the outputs.

A reward strategy is the thinking behind the decisions. It explains why you reward people the way you do, what you prioritise and how reward supports your wider business goals.

Put simply, a reward strategy provides the foundation for every reward decision you make.

Why does a reward strategy matter?

Without a clear reward strategy, reward decisions tend to happen in isolation.

One year pay increases are focused on retention. The next year they’re focused on cost control. A bonus scheme is introduced because competitors have one. Benefits evolve over time based on individual requests rather than a clear direction.

The result is often a reward package that is expensive, difficult to explain and not particularly effective.

The CIPD Strategic Reward Factsheet highlights the importance of aligning reward practices with organisational objectives rather than treating reward as a standalone HR activity. In practice, the most effective reward strategies are those that are clearly connected to the organisation’s business goals, culture and employee proposition.

A good reward strategy helps organisations:

Attract and retain the right people
Support business objectives
Make consistent reward decisions
Improve transparency and trust
Focus reward investment for greatest impact

What does a good reward strategy look like?

In my experience, the best reward strategies are surprisingly simple.

I’ve developed reward strategies for organisations of different sizes, sectors and ownership models over many years. One thing I’ve learned is that no two reward strategies are ever the same.

Even organisations operating in the same sector often have very different priorities, cultures and workforce challenges.

That’s why copying another organisation’s reward strategy rarely works. In fact, if your reward strategy is identical to your competitor, it’s unlikely to provide any competitive advantage.

The most effective reward strategies typically answer a handful of important questions:

How competitive do we want our pay to be?
How do we define fairness?
How much should reward differentiate between employees?
What role should performance play?
What ‘message’ do we want our benefits to give?
What makes our reward offer distinctive?

The answers should be clear enough to explain on a single page.

Learning from real organisations

Many successful organisations have reward strategies that reflect their wider business model.

For example, John Lewis has traditionally aligned reward with its employee ownership model, sharing business success through profit-related rewards.

Netflix has become well known for its philosophy of paying employees at the top of their personal market, reflecting its focus on attracting exceptional talent. Its reward philosophy is discussed openly within the Netflix Culture Memo and provides a useful example of how reward can support a broader talent strategy.

Neither approach is inherently right or wrong. What matters is that the reward strategy supports the organisation’s goals and culture.

Common mistakes

Some of the most common mistakes I see include:

Starting with solutions – organisations often begin by discussing pay increases, bonus plans or benefits before agreeing what they are trying to achieve.
Trying to be everything to everyone – reward inevitably involves trade-offs. A strategy that tries to maximise fairness, differentiation, affordability, retention and attraction simultaneously often achieves none of them particularly well.
Using vague language – terms such as “fair pay” sound positive but mean very different things to different people.

My golden rule

Never simply say “fair pay”. Fair pay means different things to different organisations and different employees. Instead, define what fairness means in your organisation. For example, how much weight do you place on:

External market rates?
Internal consistency?
Performance and contribution?
Skills scarcity?
Cost of living?

The clearer you are, the easier reward decisions become.

The takeaway

A reward strategy isn’t about creating a complicated document. It’s about making conscious choices.

When reward decisions are guided by a clear strategy, organisations are more likely to invest reward budgets effectively, communicate with confidence and create a reward offer that genuinely supports business success.

This article is part of Verditer’s Reward Essentials Series, exploring the questions that sit behind effective reward management. This series includes:

How we can help

At Verditer, we are specialists in reward. Contact us if you’re looking for external expertise to support your reward strategy development, or pay foundations implementation.

Follow our LinkedIn company page and sign up for our newsletter to hear about future blogs.

Related Insights

How do we determine the relative size of our roles? A practical guide to job evaluation

Part of Verditer's Reward Essentials Series, exploring the questions that sit behind effective reward management.

How do we know what the market pays? A practical guide to pay benchmarking

Part of Verditer's Reward Essentials Series, exploring the questions that sit behind effective reward management.

Business people talking in cafe - pay and reward consultancy

Contact us

Get in touch today

We’d love to hear from you. To find out how we can partner to get more out of reward, please enter your details below and we’ll get back to you as soon as we can.