The New Normal in Rewards Planning
If there’s anything the last two years have instructed, it’s that agility is paramount. Organizations that we’re able to pivot when the pandemic took root have fared significantly better than those that weren’t.
And there’s more change to come.
In this dynamic business environment that’s intertwined with societal upheaval, one way in which organizations can achieve much of the flexibility they need is by reinventing their rewards program. Such a transformation can provide the boost needed to competitively recruit, motivate, and retain top talent at a time when people are rethinking how, why, and where they want to work.
COVID-19 and social change are continuing to rework how organizations are evaluating and paying for, work performance. In fact, they are accelerating the future of employee rewards, a future that increasingly blurs the line between work and home life. The fact is that people do bring their worries to work; they have aging relatives to care for or children for whom to find daycare. People are stressed out. And they need to see this acknowledged in their benefits plan.
This is the new reality of total rewards, the new normal in rewards planning.
In the years before the pandemic landed and waylaid even the most well-conceived strategic plans, organizations had already begun rethinking their total rewards approach to reflect a heightened stakeholder focus on what’s known as ESG — environmental, social, and governance — as well as pay transparency and the role of skills and employee experience in total rewards development.
The COVID-19 pandemic not only accelerated all that, but its disruption has caused people to reassess their work life. The last couple of years have also brought to the fore societal ills such as racism, which has resulted in more organizations pursuing diversity, equity, and inclusion (DEI) efforts and folding them into the employee experience.
What is Meant by Total Rewards?
It’s a strategy that encompasses all the investments a company makes in its workforce. That includes wages, benefits, and any development rewards aimed at motivating employees to achieve specific business objectives.
What is Meant by Employee Experience?
The employee experience distills what employees experience and perceive during their tenure at an organization.
What is the Future of Total Rewards?
According to Mercer, the top total rewards issues include:
— Flexible work and how it affects compensation and the employee experience. We know that more people are working remotely, and such flexibility isn’t going away soon.
— The relationship between skills and compensation. Before, experience and accountability were the name of the game. Nowadays, to fuel organizational agility, organizations are focusing more on skills when setting base pay. Moreover, alternative forms of rewards such as incentives, recognition, and career opportunities will become the main reward drivers.
— Setting goals amid disruption. The multi-stakeholder model is growing in prominence, in terms of executive compensation. Such a model ties in non-financial goals such as ESG and DEI with traditional, revenue-dependent incentives.
— More emphasis on ESG and DEI. As we say, organizations are feeling stakeholder pressure to focus more on goals that help improve society. To accomplish such goals, companies are increasingly holding executives accountable through their pay plans.
— Building in pay equity and transparency. Rather than treat the issues as a compliance exercise, organizations see that they need a leadership-supported cultural shift that’s based on robust data and analytics.
Now that you know what the new normal is in rewards planning, and how agility is now key, you can begin restructuring your approach. Don’t become wistful for “the old days” and miss out. If you need help putting everything in place, we recommend the firm Mercer for its experience and expertise.