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Q&A: Employee pay and career challenges that keep HR leaders up at night

May 24, 2019

Willis Towers Watson weighs in on questions from top employers on pay equity, Total Rewards and careers.
Talent|Total Rewards|Future of Work

During our recent Making Connections Webcast: Modernizing Total Rewards through pay and careers (Use passcode: TotalRewards to view the recording), we fielded a lot of good questions from top employers. Employers have a lot on their mind in their desire to support pay equity, career opportunities and Total Rewards for their workforce. Willis Towers Watson experts weighed in on concrete steps HR executives can take as they try to modernize their Total Rewards through pay and careers.

Q. Where should employers start if they want to provide more transparency around pay and careers?

A. Nancy Romanyshyn: Every employer is struggling with this. Unless you are telling your story to the external market, your story is being told for you in the press, in your customer feedback and in what your employees say on social media sites. Start by answering critical but basic questions:

  • Who are your employees, e.g. what are their backgrounds and ages and what roles do most of them occupy?
  • What is your current culture?
  • Who are the different stakeholders in your organization?
  • How open are you currently around your programs?
  • What kind of education about pay and careers is needed?
  • Have you equipped managers with the tools they need to have meaningful conversations with employees around pay and careers?

Q: How should you proceed once you have the answers to those basic questions?

A. Nancy Romanyshyn: The next step is to think about your strategy. Understanding your people and thinking about what they should know will help you create a better strategy for more transparent communication. Then you can take a critical look at your program design and start asking more questions. Are your programs “transparency-ready?” For example, how easy is it to understand how pay decisions are made?

Compensation programs are inherently complex, but the simpler you can be in your explanations about pay decisions and better equip your managers and leaders to have those conversations, the better off you will be.

The road to better transparency around pay and careers is a transition. It’s not like flipping a switch. It's really thinking about it and then taking the appropriate steps. For more lessons on the path to pay transparency, check out this recent blog post from my colleagues Casey Hauch and Stacey Rapacki.

Q. What are some of the roadblocks organizations face when transitioning to a more open culture about pay and careers that fosters employee engagement?

A. Jacki Bassani: There are a lot of roadblocks when transitioning to a more open culture about pay and careers, because the topic is so complex. Willis Towers Watson research shows that employees who understand the basis for their pay are much more likely to be highly engaged than those without that understanding. However, paying more does not necessarily translate into better employee engagement. Many organizations spend money on benefits and learning and development programs that may not be valued by their employees as much as they had hoped. We suggest exploring and testing your understanding of what your employees are looking for and then having a transparent, honest and authentic dialogue with them around pay.

Nancy Romanyshyn: I like how you said “authentic.” There’s also a legal aspect of pay equity, which puts the analytics relating to pay transparency under attorney client privilege. This often makes full transparency a challenge, as there are potential legal risks involved with being completely transparent.

However, as Jacki points out, paying more does not automatically translate to more highly engaged employees and sharing a pay equity metric or disclosing every employee’s salary does not guarantee that employees will feel fairly paid.

We encourage employers to be strategic in their communication with employees to help them understand they are paid fairly for their contributions and in comparison with one another. That means talking to employees about how the company approaches fairness and pay decisions.

You want to think through your communication strategy in advance. You don’t want to be reactive or even hyper-focused on just one piece of that equation, such as the “cents to the dollar” metric or “global gender gap” we have seen some companies report. It's better when companies take a holistic view of pay and fairness with integrated, authentic messages. That’s when it resonates best with employees.

Jacki Bassani: We also believe it’s important for employers to communicate the full picture of their employees’ Total Rewards, including benefits, to give them the broadest perspective. When employees truly understand “the give and the get,” e.g., I’m coming to work and giving you X, and for that I am receiving Y in return, it’s more holistic. We find increased satisfaction, which leads to higher levels of engagement.

Q. How do you determine and balance fairness while also differentiating incentives for key populations?

A. Emory Todd: Bringing clarity to the definition of performance is important here. The more you can distinguish between levels of performance and associated rewards, the more likely your employees are to perceive rewards — in particular compensation — as fair. When you can define performance in a very crisp way, there are no surprises and there’s not a great deal of discretion.

We've even seen companies try to quantify stretch goals or the likelihood of achievement, running probability analysis to help quantify the degree of stretch in an effort to increase clarity around goals.

While it’s more easily said than done, it’s something that employers need to work toward, because once employees feel like there isn't fairness in a process, they're not engaged in it, and you're going to lose them.

We’re also seeing more companies offer additional choices within their benefit programs. If you offer more choice, you're able to achieve the fairness objective more directly as you are able to better meet “individuals where they are” in their particular life stage or circumstance. I think that's partly behind the increase in the adoption of exchanges and marketplaces. It makes choice real for employees, personalizes the experience and makes things as fair as possible.

Q. In our merit discussions this year, we had to advise managers that no employee can be greater than “meets expectations,” but we tout ourselves as a pay-for-performance culture. How can you recover from that?

A. Emory Todd: Given the difficulty of managing base pay decisions and companies’ desire to better define a clear purpose for each program, we're seeing some move to a market and skill-based pay administration philosophy, where organizations are taking merit and performance out of base pay decisions.

Instead, they are basing pay on how employees stack up against the market and the skills they bring to the role, while using incentive pay to focus on differentiation and performance.

This approach helps avoid deviating from merit-based guidance or sending tough-to-unwind, performance management messages, due to competitive and business pressures. For a deeper look at emerging compensation practices, our Getting Compensation Right survey explores what changes will be required to meet the demands of today’s evolving workforce.

Nancy Romanyshyn: To me, it’s around delivery and creating a total pay experience that is authentic in how you’re designing and delivering your programs. It’s about focusing on many objectives: How base pay attracts the right talent with the right skill sets, ensuring employees are competitively and fairly paid, better leveraging the role of your incentives and recognition programs and rewarding performance to specific targets and behaviors that drive company performance in a financially meaningful and timely manner.

Simplifying your program design and processes also helps you to focus on the right messages to share with your employees and explain compensation in a straight-forward manner that helps them to internalize those messages.

Q. Increasingly, we are seeing employers that want to hire more employees with disabilities. What are some ways employers can hire talent with disabilities?

A. Nancy Romanyshyn: I think employers are realizing that people with disabilities have been an untapped source of talent due to the limitations of conventional sourcing and recruiting processes. Technology has been a great enabler and enables people to have access to jobs they didn't have before.

We see this with the ging expansion toward neurodiversity, a concept where neurological differences are recognized and respected as any other human variation. More companies are focused on hiring people who think differently and have different experiences to enrich their organizations and make sure that they’re taking advantage of all available talent.

It’s also about thinking through the job itself. What is core to the job? What skills do you really need? How can I remove aspects of the role that aren't as necessary to the job so that a more diverse group can come and perform the responsibilities of that job?

Organizations can also create a focused effort for hiring more people with disabilities. Willis Towers Watson, for example, has an autism toolkit, and we have been more deliberate about hiring people with autism.

Q. What’s the best approach for mapping and communicating career paths and job families in a skill-based organizational structure versus a role-based model?

A. Jacki Bassani: Many organizations are starting to think about skills versus roles and functions. But you need to be thoughtful about changing your job architecture when transitioning to a new skills-based model to ensure you can build off that architecture and it’s flexible.

Most of the organizations we work with also have a communication strategy in place that complements changes to roles and skills, because it helps to reinforce to employees that the organization is invested in its employees and their future. Not only does your organization want to progress, but you are also going to make sure that you're developing your employees and their skills to give them more meaningful experiences. It would be counterproductive not to communicate the new way you're working to employees.

A focus on learning and development is equally important. Most organizations recognize they have a great talent base, but they may not have all of the skills they want or need for the future. So you have to answer a fundamental question: Do I build the talent I need or do I always have to go out and buy the talent, which has its own inherent risks. So we are seeing a lot of organizations thinking about learning and development from a different lens and reinventing it to meet their needs. In this way, they can continue to advance their employees throughout their employee life cycle.

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