In terms of rewards planning, why would you change what’s long worked for you? On its face, the query is understandable. After all, for decades on end, all an organization basically had to do to attract and retain talent was to offer a nice paycheck and standard benefits.
Well, mostly owing to the pandemic, the business environment is now markedly changed, and continues to evolve. In this tight labor market, employees have more of the upper hand, and are increasingly pickier regarding where and how they wish to work.
So, for employers, it’s a balancing act. You want to demonstrate that you care – because you do – but if you don’t make sure costs are aligned with business objectives, you may wind up with no business at all. On the other hand, employees’ expectations are shifting; people expect more, where total rewards are concerned.
It’s a conundrum for organizations, which are facing a new normal in rewards planning. Here’s what you should consider.
What is Meant by Total Rewards?
At its essence, total rewards can be defined as whatever an organization offers in exchange for employees’ contribution, membership, and commitment.
What’s in a Total Rewards Package?
This varies among employers, but total rewards packages generally include, in addition to wages, items such as health, vision, and dental insurance, plus voluntary benefits that can include offerings such as critical illness and disability coverage or financial counseling. Total rewards packages can also contain retirement plans as well as vacation time, paid time off, work-life flexibility, and opportunities for career advancement.
What is Employee Experience?
Employee experience distills what an employee perceives, observes, and encounters over the course of their tenure with a company. It basically captures an employee’s sentiment about their employer.
What Has Changed that Affects Rewards?
Quite a lot, and in a relatively short time. Before 2020, the year the pandemic settled in and turned all of business on its head, organizations had already been rethinking their total awards approach. Over the years, employers began reconsidering salary adjustments and started crafting a multi-stakeholder model for incentives and performance. They also began putting more emphasis on what’s known as environmental, social, and governance – or ESG – and bearing down on skills assessment. All this dovetailed with the emergence of the issue of pay transparency and the role of employee experience in putting together a total rewards package.
Two years later, that agenda has not only been accelerated, but it has markedly shifted. The disruption caused by the pandemic has reached into all our lives and challenged longstanding assumptions about where and why employees work.
The Future of Total Rewards
Mercer lists a handful of issues that are front and center on employers’ agendas:
- Flexible work and its impact on pay and employee experience
- The effect of skills on base pay and raises
- Objectives-setting and incentives amid financial insecurity
- Acceleration of ESG and diversity, equity, and inclusion
- Making pay equity and transparency part of the organizational culture
In sum, there will come a time when the new normal in rewards planning will simply be the status quo. That’s how entrenched the evolution has become, and you must adjust or be left behind. After all, recruitment and retention are at stake, and you don’t want to lose out to the competition because you refused to budge.
If you have neither the time, expertise, nor resources to handle all this yourself, we suggest the consultant Mercer, which can help you balance empathy with economics … and create wins all around.