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Article | Beyond Data

Key considerations when building an effective total rewards strategy in an evolving business landscape

By Edward Hsu | August 30, 2023

Changes in the global compensation and benefits landscape call for employers to adjust their total rewards strategy.
Beyond Data

The structure of compensation and benefits practices worldwide is being redefined as employers respond to persistent inflationary pressures alongside a tight labour market. More employers are willing to adjust salaries to help their workforce cope with the economy. In most G20 countries, organisations are expected to have a higher salary increase rate in 2023, compared to 2022 or with the projected value for 2024, according to our 2023 WTW Salary Budget Planning Survey Report (Figure 1).

In regions experiencing hyperinflation, employers are offering more frequent salary increases. For example, 52% of our survey participants in Argentina say they plan to adjust the salary of employees four times throughout the year. Given that inflation is causing employers to change salaries more frequently than usual, it’s unsurprising that implementing a full compensation review of specific employee groups or for all employee groups is the first and second priority of organisations in most countries (Figure 2).

Figure 2. Top five changes to compensation programmes

Source: 2022-2023 WTW Salary Budget Planning Survey Report (2023 July Edition)

China Canada United States Mexico France Germany United Kingdom United Arab Emirates
Compensation review of specific employee groups 1 1 1 1 1 1 1 1
Full compensation review of all employees 2 3 3 2 2 3 2 2
Hire people higher in relevant salary range 2 2 3 2 3 3
Raise starting salary ranges 5 4 4 5 4 4 4 4
Enhance use of retention bonuses or spot awards 4 5 5 4 5
Targeted base salary increases for specific employee groups 3 3 5 5 5

Further, employers are also expanding their benefits programs to be more competitive in the talent market while optimising their spending. These initiatives tend to be more focused on changes to health benefits, opportunities for career development and mental health support (Figure 3).

Aside from compensation, employers are also concentrating on providing benefits to their workforce, with more than half (61%) offering health benefits (Figure 3). The next top priorities include career, training and development opportunities and risk and insurance benefits. For employees, however, benefits that hold more value include retirement and long-term finances and flexible working arrangements. This suggests that there is a gap between organisations and their workforce on benefit priorities.

It appears that the compensation and benefits landscape is shifting inside and even outside of organisations, with global developments taking place. Formulating an effective total rewards strategy calls for taking these changes into account for employers to maximise their compensation and benefits spend.

Stronger emphasis on diversity, equity and inclusion

Making workplaces more diverse and inclusive has emerged as the top strategy for employers to help them encourage talent retention and attraction amidst a tight economy.

The majority of organisations surveyed across eight countries are more inclined to promote diversity, equity and inclusion (DEI) in the workplace (Figure 4). As compared to our 2022 December survey results, the stronger emphasis on DEI has increased in five out of eight countries. This indicates that employers want to be more accommodating toward the increasingly different needs of their employees, while at the same time, encouraging more diverse talent to join their ranks to help move their businesses forward.

Need for enhanced employee experience

Providing a better workplace experience for employees is one of the top actions organisations have taken or are planning to address a competitive labour market and inflation. As seen on Figure 4, the drive to improve employee experience has grown in five out of eight countries compared to the results in our December 2022 Salary Budget Planning Report. Helping employees have better experiences at work can help companies earn their loyalty and minimise attrition in a time of talent shortage and rising costs.

Growing push toward pay equity and transparency

Providing equity and transparency in pay has also shown to help improve employee experience. Employees want more assurance that they are being paid fairly. Meanwhile, providing an equitable pay structure enables employers to accomplish their initiative to have a broader emphasis on DEI. On a larger scope, regulators are also introducing new requirements for employers to be more transparent on pay as way to ensure they are complying with long-standing provisions local legal provisions on pay equity. Equal pay or pay equity exists in an organisation when pay differences among individuals who have the same work are due to objective reasons, and not because of age, ethnicity or any other protected characteristics. Meanwhile, pay transparency pertains to measures that provide employees with better visibility and clarity on their pay arrangements, the company’s pay policies and how others are paid.

The European Union (EU) has just introduced the most far-reaching pay transparency provisions to date through the EU Pay Transparency Directive. The provisions of the Directive must be adopted by each member state by June 7, 2026 and will affect every employer in the EU. Growing numbers of U.S. states and cities are adopting increased pay transparency provisions on hire. Countries from Australia, to Japan, to Brazil have passed more stringent requirements relating to pay equity and transparency. In response, employers around the world are reviewing their pay and HR processes to ensure they are delivering pay equity and transparency. This includes having:

  1. Robust job architecture and job levelling to determine comparable jobs
  2. Clearer guidance for managers on pay decisions on hire, promotion and annual review to avoid unexplainable pay differences
  3. Increased pay equity analytics and checks in pay process

Most common pay equity/pay transparency themes across the globe

Right to information for new hires and/or employees

  • Germany, Finland, Brazil, Canada, US

Equal pay/pay gap calculation - no disclosure

  • Italy, Belgium, Sweden, Canada

Pay gap disclosure typically with action plans

  • Australia, Japan, Switzerland, Spain, Portugal, France, UK, Ireland, Norway

Pay information, pay gaps, action plans - on granular level

  • EU, Israel

Next steps for employers

These developments in the global compensation landscape call for employers to consider the following actions:

  • Evaluate compensation and benefits programs
    Employers need to assess their current compensation and benefits programs to check if they are still relevant to their workforce considering broader changes taking place. A review can help them to stay at par with market trends, be responsive to employee needs and comply with upcoming policies on pay equity and transparency.
  • Enhance employee listening to understand what they value most
    Employers need to enhance employee listening to understand what’s most valued by their workforce and avoid gaps in their total rewards strategy while maximising their spend. Employers can develop an agile digital listening strategy (such as employee resources groups, focus groups, pulse surveys and conjoint surveys), allowing employee opinions to be measured on a continuous basis (to keep a live track of the pulse of the organisation) as well as on an ad hoc basis (to understand issues as they arise), with the ability to understand differences by employee cohort. In return, employers can expect improved employee experience and engagement at work.
  • Improve data and analytics capabilities
    Having updated data on the dynamic changes in the talent landscape will allow employers to accurately compare and position their compensation and benefits against the broad market. In addition, increasing the simplicity of data collection and analysis supports improved collaboration and transparent communication within the organisation. Ensuring ready access to data and analytics is also pivotal in adopting pay equity and transparency in your organisation.
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