The new year brings thoughts of renewal, fresh starts and an optimistic view of the opportunities that lay ahead. Yet, if the last few years have taught us anything, it’s that change is inevitable and we should be prepared for whatever comes our way.
Succeeding this year will require a different way of thinking that acknowledges that traditional pay and HR tactics are no longer as useful as they once were. Fresh thinking combined with the five key priorities outlined here will make the difference between an organization that thrives in 2023 and one that merely survives.
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01
Inject flexibility into employee pay
Originally, employee pay focused on the employer/employee value proposition. Organizations paid employees in exchange for the services they provided. The same holds true today, except your employees not only need to be rewarded, they also expect to be recognized, engaged and even inspired. This means it’s time to inject flexibility into your compensation strategy, including rethinking equity programs and delivery. It’s time to go beyond pay.
As you look to attract and retain your talent – including contractors, contingent workers, part-time staff and other non-traditional employees – look at what they value most to maximize your pool of available resources and drive engagement. The goal in 2023 is about retaining the talent you want to keep and attracting new people to fill any talent or skills gaps. Maintaining employee engagement during continued uncertainty, which includes ongoing inflation in certain parts of the world compounded by the risk of slowing business performance, means you needs to look for ways to build flexibility without increasing costs.
Consider all components of your employer-employee deal, looking beyond pay elements like base salary, bonuses, long-term incentives. Consider your health and wellness benefits, career progression framework, and learning and development opportunities. This may range from improving the employee experience to a broader emphasis on diversity, equity and inclusion, more workplace flexibility or even greater financial security.
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Globally, 40% of employees reported living paycheck-to-paycheck in 2022. 35% said financial problems are negatively impacting their lives.”
Flexibility comes in many forms, from expanding traditional work arrangements to more personalized rewards. Consider how the workforce and its expectations have changed and compare it to your existing compensation philosophy. Does your philosophy still stand up under the change? Once you open your thinking beyond pay, this can give you the opportunity to think creatively about total rewards.
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02
Listen to employees, or risk losing them
The best way to approach flexibility is to do it knowing that it will make a difference for your workforce. And knowing what will make a difference requires listening. Consider, for example, results from our 2022 Global Benefits Attitudes Survey: Pay and external opportunities continue to top employees’ reasons to leave an organization. But those weren’t the only factors.
A review of WTW’s global database of employee opinions – the world’s largest with more than 250 million completed employee surveys – found that the second most significant area of decline was in perceptions about pay fairness. Employee perceptions about whether their pay is fair compared with that of others in their organization dropped, and it was significant. See Figure 1 below.
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In addition, employees responding to the Global Benefits Attitudes Survey cited overwork, lack of growth and a low sense of purpose. More than half of employees around the world expressed low emotional and social wellness at work, and many employees said they want an organizational culture that addresses wellbeing holistically.
With the increase of remote working in the past three years, organizations have struggled to respond to increased employee expectations for equitable and transparent pay, keeping the workforce engaged and creating an inclusive culture. Taking a fresh perspective to your organization’s strategy around the overarching employee experience is critical in 2023, and this means going beyond simply using buzzwords like “ESG” or “mental wellbeing” into your programs and practices.
Again, the first step in re-thinking that strategy is listening to employees. Tools like employee surveys and focus groups (virtual or traditional) will provide a true, clear understanding of what employees are thinking about, what they need and what is most important to them. Once you have a view into employees’ mindsets, that can trigger new employee experience approaches.
Ultimately, forward-thinking organizations are shifting the construct of the employee experience to be more purpose-driven and focus on employee attraction and retention. Employers are reviewing pay packages, existing health plans and benefits, work arrangements, and diversity, equity and inclusion programs to remain competitive.
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03
Diversify your talent pool
Along with thinking differently about the overarching employee experience, employers also need to think differently about how – and who – they recruit. Traditionally, companies have established a defined talent market or comparator organizations to measure the competitiveness of their pay programs. These peer sets have been based on the companies that you attract talent from or lose talent to and are in the same industry and/or similar organizational size.
In 2023, organizations are better positioned to think more broadly, particularly given the volatility in the talent market and the prevalence of skills across various industries and markets. Review your skills requirements, consider your existing workforce and make a list of skills gaps. Which capabilities would benefit from looking across broader, cross-industry markets to include nontraditional peers that are competing for the same talent?
This exercise may reveal that you need to benchmark beyond the same industry or company size to consider other industries or company sizes that include the individual skills, roles and jobs your organization needs going forward.
You can even define your talent market based on a benchmark analysis of your total rewards components (e.g., cash, benefits, insurance, incentives, travel policies, remote work practices). With additional research into your target talent group, you can determine which reward component will serve as a critical differentiator for your organization.
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04
Personalize to differentiate
One benefit of the rapidly changing world of work is that innovative reward strategies can be more agile and resilient. It also provides the opportunity to reinforce employees’ confidence in your organization’s ability to flex to constant market changes and reassures them that you value who they are and what they bring to the business.
As you redesign your traditional rewards strategies, explore a multi-layer design that considers both the monetary and nonmonetary needs of your workforce. This extra step will create an opportunity to build programs in a more meaningful and personalized way to strengthen employee loyalty and encourage your talent to achieve business goals.
Additionally, as organizations increasingly realize that fair pay does not equate to paying everyone the same, differentiating rewards will become a higher priority. Consider two employees who perform similar jobs; perhaps they have completely different compensation or total rewards packages because, while their jobs may be similar, their needs and lives outside of work are not.
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05
Embrace your two new best friends: data and tech
Inflation remained high at the end of 2022, though it trended down from the highs experienced in mid-2022 across major economies. With concerns continuing over high inflation, economic uncertainty and a potential recession, this could lead to even more changes around jobs and skills and, naturally, will impact pay. Frequent and erratic economic fluctuations may cause employers to make risky decisions, such as aligning pay with inflation rather than adhering to a core compensation philosophy.
Effective leaders will need to balance often-conflicting needs like how to grow while managing costs and how to invest in talent without ratcheting up pay and risking layoffs. Making sound, defensible pay decisions requires access to the most updated and reliable data, advisory and technology. Having the right tools on-hand not only allows you to model potential scenarios and supports critical business decisions. The timeliest, most credible data gives you a view of multiple factors affecting pay across regions, industries and company sizes. It also helps you respond to difficult questions from leadership. And an often-forgotten aspect of your salary data analysis is the human touch.
Choosing the right salary survey provider goes beyond data and software. The partner you choose should take time to understand your organization’s challenges, whether they are tied to attraction, retention, or the overall employee experience. Your survey partner also should have a clear understanding of the intricacies of your market, industry (including cross-industry opportunities) and company size.
Access to quality data, technology and Data Intelligence consultants will prevent you from making costly mistakes that may cripple your organization as the world keeps changing and challenges keep rising.
The world has changed; your rewards need to as well, the past three years have fundamentally changed rewards and the way they are developed and executed. Compensation alone isn’t enough; you need to take a total rewards view, keeping in mind what your workforce will value. The competitiveness of your compensation package needs to deliver a solid return on investment, and if your employees don’t see the value then your organization won’t either.
This year, rather than continuing with a reactive approach to rewards and HR, you need to start with a clean slate. Acknowledge your business goals and identify where you have gaps in talent that will support achieving those goals. Then take an honest and hard look at your rewards programs and the gaps that exist there. Finally, learn what is important to your employees and see how you can align your skills gaps, rewards offerings and employee expectations.
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