The last two years have significantly shifted employees’ expectations of the employee-employer relationship. Employees now expect organizations to provide meaningful support for their wellbeing needs, both inside and outside the workplace. They now expect work to provide them with a sense of purpose and greater flexibility on how, when and where they work. They now expect employers to demonstrate clear commitments toward environmental, social and governance (ESG) and diversity, equity and inclusion (DEI).
Organizations need to meet these expectations. But that’s a difficult task given labor shortages, rising costs, supply chain disruptions, geopolitical tensions and an ongoing pandemic. How then do organizations rise to meet this challenge? They must start with a rethinking of Total Rewards.
An effective Total Rewards strategy creates continuity, confidence and stability for employees, while also optimizing spend. Companies that get it right will be best positioned for immediate success, gain a long-term edge in the competition for talent and create sustainable long-term value.
The global pandemic has accelerated automation and digitization of work, and greater use of hybrid work models by many organizations. This, combined with the talent shortage, creates a need for rebalancing rewards and benefits (e.g., an allowance for in-demand skills, tuition reimbursement for reskilling and upskilling, ergonomic equipment for remote work, work/life balance support), and may render some traditional benefits less relevant (e.g., car allowances, on-site amenities).
To withstand competitive pressure on talent and rising compensation costs, savvy employers will reinforce rewards that provide long-term, wealth-building potential, for example, to attract and retain those with highly coveted skills. Furthermore, a skills-enabled career framework opens borderless career opportunities, supports upskilling for all employee groups and unlocks tremendous value from the workforce.
Evolving expectations of employees and new ways of working have further amplified the complexity of meeting the needs of an increasingly diverse workforce. By realigning Total Rewards and work policies with what employees need and want — while eliminating less relevant or underutilized programs — companies can optimize their Total Rewards spend.
However, personal needs and circumstances of individuals can vary significantly. Offering choice may take different forms, from adjusting coverage and contributions based on needs and costs to fully flexible compensation and benefits. While such decisions are based on many factors (e.g., regulations, administrative complexities, prevalence), flexibility will maximize the value of Total Rewards for different employee cohorts.
What will be the long-term consequences of the pandemic on employees’ emotional (stress), social (networking) and financial health (job security and adequate savings)? How will sedentary lifestyles created by work-from-home environments affect health outcomes in the coming years? How will health plan management change as COVID-19 evolves into, possibly, an endemic disease? How will employees fare in the face of future challenges that affect the movement of people and goods?
Leaders have a significant opportunity to get ahead of these risks and mitigate long-term effects by rethinking how Total Rewards can support the wellbeing of all employees while building resilience to prepare for unpredictable future events. Options can include, for example, minimum standards for pay and benefits and negotiated value-added wellbeing services and solutions from vendors.
Organizations can reinforce commitment and a sense of purpose by ensuring that Total Rewards support their DEI and ESG agendas. Fair pay policies, investing in skills development, inclusive benefits programs and leave policies are examples of how Total Rewards can further an organization’s DEI goals. By adopting an equitable Total Rewards mindset, organizations enhance health and wealth equity by addressing underrepresented groups’ diverse needs, preferences and expectations.
Organizations can further broaden the “E” in ESG by considering green benefits and applying ESG criteria in vendor selection and the “S” by ensuring safety and security, fairness and equality through their Total Rewards programs.
Organizations with a strong emphasis on culture, values and purpose see higher employee engagement and lower attrition. Organizations can emphasize their culture and maximize the value and utilization of programs by leveraging tech-enabled communications that promote “total employment value,” as well as delivery of Total Rewards.
Organizations with Total Rewards programs that offer financial security, enable their employees to develop their capabilities and create opportunities for professional growth — in addition to the other three employee experience dimensions of work, purpose, people — achieve greater business success.
In an environment of constant disruption and transformation, effectively designed, financed and delivered Total Rewards strategies can enhance business value and build a productive and engaged workforce. When done right, these programs make employees feel valued by providing an equitable employee experience and reinforcing organizational culture and purpose.
To do this successfully requires a globally consistent philosophy and policies that can adapt to ensure local relevance, and a strong operating model and governance structure to execute the strategy.
The investments and change necessary for success may not be accomplished within a year, but they will lay a foundation for the long term. In turn, they also create a brighter and more resilient tomorrow for the organization, its employees and their families, and the communities in which they live.
A version of this article appeared in Workspan Daily on March 17, 2022. All rights reserved, reprinted with permission.