Is it Time to Update your Total Rewards Strategy?
Creating and sustaining a high level of employee engagement is critical to achieving business results and delighting our customers. While it is evident that employee engagement is about much more than pay and benefits, without attractive compensation and benefits packages, organizations struggle to compete for talent in a tight labor market. Even organizations with long tenured employees and less turnover have reason to pause and be deliberate about their talent strategies. As the Boomers transition out, younger generations are bringing different expectations and skill sets to the labor market. How is your organization situated to meet the needs of the changing workforce? What is the right combination of pay and benefits that meets both the needs of your employees and is cost-effective for the organization?
To understand the needs of your employees, ask them. You can get only so far by researching creative solutions and making assumptions based on the demographics of your workforce. Use employee surveys and focus groups strategically to evaluate and gain insight into what matters to your employees. We can always improve as an employer and asking employees for feedback can help narrow the focus of improvement efforts.
Armed with internal data and insights from our employees, conducting a market analysis of compensation and benefit programs will reveal how current practices match up to the external market, specific to the industry, region(s), and size of the organization. External market data can help with evaluating competitiveness of pay and benefit programs and an internal audit can identify any pay management or equity gaps. Take advantage of the opportunity to use benchmarking data to review and validate talent strategies, identify gaps, and realign practices to achieve business goals.
In order to attract and retain the best talent, you’ll need to make decisions about how to pay relative to the market for your positions. For hard to fill positions will you add a premium to increase your chances of attracting better candidates in a competitive market? By paying new employees a premium, you may inadvertently frustrate or discourage your current employees by creating pay compression. Take the time to evaluate potential consequences of adjustments to either individual pay or to pay bands.
As organizations evolve, pay practices must also evolve. Using internal and external data is key to making informed decisions when considering an update to pay practices and compensation structures. Beyond the data, your organization’s vision, mission, and values statements explain who you are as an organization, what you care about, and how you aim to achieve your business goals. It makes sense that your compensation philosophy is consistent. As an example, if your organization is mission driven and focused on social responsibility, perhaps employee base salary is lower relative to the market, but your total rewards package includes variable pay programs and a broad range of health and welfare benefits and coverage of a higher percentage of premium costs. Your compensation philosophy is key to your organization’s narrative about how you compensate your employees and deliver on the Employee Value Proposition (EVP).
It can be daunting to design and implement