Compensation and Benefits: Strategies & Solutions in the New Normal...Attraction, Retention, Engagement and Succession, Meaghan Wheeler, Total Rewards Consultant, Mercer
Learn what the leading experts and compensation studies are showing is the best path forward in this critical area for future workforce compensation & benefits.
K F O R C E I S C H A N G I N G F A C T O R S I N F L U E N C I N G T O T A L R E W A R D S M U LT I - G E N E R AT I O N A L W O R K F O R C E W O R K F O R C E A N D W O R K D I V E R S I T Y D I G I TA L / M O B I L E / B I G D ATA G L O B A L I Z AT I O N EMPLOYER PERSPECTIVE Compensation Benefits EMPLOYEE PERSPECTIVE My value today My financial security and protection Work/Life My quality of life
L O R G A N I Z A T I O N S R E S P O N D ? E M P L O Y E E V A L U E P R O P O S I T I O N F O R T H E N E W N O R M A L YESTERDAY PRESENT FUTURE Hire to retire Annual review cycle Core employees viewed as crucial for success Paternalistic Transactional employment relationship Individual accountability for benefits, careers and workplace One-size-fits-all Limited rewards flexibility Personalized rewards reflecting global cultures and multi-generations S T A N D A R D I Z E I N D I V I D U A L I Z E
L O R G A N I Z A T I O N S R E S P O N D ? C O M P E N S A T I O N F O R T H E N E W N O R M A L YESTERDAY PRESENT FUTURE Limited employee risk Employees desire fixed pay Employees as business partners Base pay linked to internal equity (job evaluation) Market pay becomes common practice Market pay within global levels Pay positioning is at market Most organizations target pay between P25 and P75 Fixed pay is at P25–P50 with P50+ coming from variable cash/equity compensation Variable pay is limited to executives and sales Most organizations offer variable pay Significant variable pay opportunity is the norm I N T E R N A L L Y B A S E D E X T E R N A L L Y B A S E D
L O R G A N I Z A T I O N S R E S P O N D ? B E N E F I T S F O R T H E N E W N O R M A L YESTERDAY PRESENT FUTURE Paternalistic Organization role continues to decline Individual accountability through self-service Organization provided health care, retirement, etc. Cost shifting and abandonment of employee benefits Organizations provide group purchasing power without being the sponsor Defined benefit pension plans Defined contribution 401(k) plans with and without employer match Healthcare for employee and dependents Frequent cost shifting Healthy employees fuel a healthy business C O M P A N Y R I S K E M P L O Y E E R I S K
P I N G A T O T A L R E W A R D S S T R A T E G Y S A M P L E B L U E P R I N T ROLE OF REWARD ELEMENT COMPETITIVE POSITIONING IMPACT OF POSITIONING METRICS C O M P E N S A T I O N Base pay Attract and retain; reward building skills 50th percentile Risk tolerance Acceptance rate turnover; appropriate skills Annual incentives Reward individual/ unit/corporate performance Base + STI = 75th percentile Performance orientation Business results Long-term incentives Link to shareholder value creation Base + STI + LTI = 90th percentile Rewards long-term growth Stock price growth B E N E F I T S Group benefits Personal risk management Leading-edge design; 50th percentile Desirable employer Cost and value delivered Retirement Wealth accumulation 50th percentile Facilitate orderly retirement Retirement income adequacy; financial management Perquisites Tax efficiency Market practices Employment brand Cost; commitment index
P I N G A T O T A L R E W A R D S S T R A T E G Y T H E F R A M I N G Q U E S T I O N S • What does or should differentiate it from competing employment opportunities? • How do employees place value on the current rewards package? • What are the rewards and labor environment(s) in which the company competes? • How do they influence or constrain rewards practices that the company may wish to adopt? • What are workforce needs in terms of structure, behavior, capabilities and performance? • How should the programs be designed and delivered in order to secure those workforce outcomes? • What business metrics determine whether the rewards programs can be provided at an affordable and sustainable cost? • How should they designed to to be financially viable in different business cycles? C O S T P E R S P E C T I V E E M P L O Y E R P E R S P E C T I V E E M P L O Y E E P E R S P E C T I V E E X T E R N AL P E R S P E C T I V E
P I N G A T O T A L R E W A R D S S T R A T E G Y L E S S O N S L E A R N E D • Prioritize your Total Rewards based on your ability to influence desired outcomes in terms of attraction, retention, engagement, productivity and results. • Utilize a fact-based conjoint survey decision process — employees and/or business operations. • Finalize decisions based on your specific situation — best fit vs. best practices. • Create a holistic communication campaign that is multi-media and targeted. • Define your Total Rewards governance to ensure consistent application of policies and procedures.
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