As global economies improve, HR professionals around the world are finding that their approach towards attraction, retention, engagement and productivity is shifting. The economic uncertainty that led top talent to seek job stability and security as a priority over rewards, has lessened, and those employees are becoming mobile again. Top talent is once more on the lookout for the best opportunities, and the best rewards.
It’s an interesting situation. Top talent is looking for more, yet despite improving economic conditions companies still need to be cautious with their spending, and as a result, this is leading HR to a closer examination of what should be rewarded, and finding creative ways to do this. When candidates are looking at which company will be the best for them, they want to see a transparent, modern compensation & benefits strategy that will both incentivise and reward them for their work.
So HR is finding that comp & bens is once again the cornerstone of their employment offering, and new philosophies need to be adopted to stay competitive.
There are four challenges to be met in this area:
• Strategies need to be effective but remain within budget
• They need to attract as well as retain key employees
• Rewards should be driving the behaviours that create preferred organisational culture
• Employee preferences, workforce dynamics and demographic shifts are changing quickly
Whereas the four challenges listed above are not new in themselves, companies are adopting different approaches to deal with each of these. Firstly, the bedrock of Compensation & Benefits strategy remains salary, with pay for performance again becoming a major differentiator, however, this is now being more acutely linked to what’s at the heart of the organisation: business goals, values and competencies. These are managed through regular performance management and personal development cycles.
Employees with specialist skills, particularly in roles that are hard to fill, need to be retained in the business and they are not only being rewarded with higher pay, but pay strategies that put them more firmly in the driver’s seat; they get more choice in how they are rewarded, they get rewards that are more linked to their personal performance, and they get to play more of a part in their performance management cycle.
Whilst salary is still hugely important to employees, a growing number in today's workforce have preferences and goals that are not solely cash related. Work-life balance, flexible working, wellbeing and personal development are all areas in which they look to their employer to offer some incentives. There is a growing philosophy around 'Total Rewards’ that focuses on the full range of benefits, opportunities and allowances that are offered, not purely salary.
Employees at varying life stages, and with diverse priorities, like to have the opportunity to pick and choose the benefits matter to them most. Offering cafeteria plans and flex benefits has become the norm in recent years, with individuals being able to create their own bespoke package of benefits that are important to them. We are seeing this used increasingly by employers looking to differentiate their offerings in the recruitment market.
Whilst the philosophy is evolving, the way that the total reward package is communicated internally needs to keep pace. For example it might be preferable for employees to receive a Total Rewards statement that conveys the real value gained from the package of rewards that they have chosen but in reality, if they receive a statement at all, it tends to be limited to the cost of rewards. This is a real missed opportunity to show the full value to the individual of what's on offer. Some benefits may be difficult to quantify, such as flexible working, but more effort should be made. On the flip-side, we see more progressive companies driving total rewards through custom software, with employees able to see a running cost of the total investment that’s been made in them in real time.
With rewards needing to drive behaviours there is an increasing use of recognition in helping to create a culture of mutual respect and appreciation, and promote collaboration. This usually takes the form of a small monetary, or often non-monetary, award, and isn’t only used to recognise successful results. Behaviours and innovation are increasingly highlighted too. Recognition is available for every employee at all levels, and initiatives such as this help create a strong employer brand.
The growing Total Rewards philosophy shifts Compensation & Benefits from being primarily part of HR administration, and places it firmly at the forefront of talent management strategy. It now helps drive the attraction, retention and motivation of employees, whilst underpinning a desirable employer brand. Performance related pay is more agile, with specialist skills increasingly recognised.
The major change in all of this, is a more holistic and individualistic approach to benefits that recognises employee choice, preference, and that gives a feeling that they are in more control of their rewards. Many of these newer benefits address employee wellbeing and the way they feel and perform. Their long-term value may not be easily expressed in monetary terms but should show through increased productivity, retention and engagement.
