How can employers benchmark their total reward strategy?

benchmark

Need to know:

  • Benchmarking beyond quantitative pay figures can prove difficult, but employers need to consider a wide range of elements when measuring the success of their total reward package.
  • External comparisons are important, but canvassing internal employee opinion is also integral when deciding on changes and shaping strategy.
  • When updating a total reward strategy, employers should consider prospective employees as well as current staff to ensure longevity.

total reward strategy is key to attracting and retaining the right staff. Conducting a benchmarking exercise can ensure a strategy remains competitive and fit for purpose.

However, a complex mix of elements make up a total reward strategy. As well as pay and benefits, employers need to consider factors such as career, wellbeing and purpose, says David Wreford, partner at Mercer.

“Employees increasingly value elements such as flexibility, support for diversity and inclusion and the organisation’s corporate and social responsibility,” he explains. “They want to work for an employer that does good, or lets them take time out to volunteer. It’s about much more than what’s in the pay packet.”

Setting the standards

Extending the measurement exercise beyond the usual pay and benefits presents challenges, not least because the various components are often owned by different people. An organisation may need to consider streamlining and unification, before it can claim to have a coherent strategy that might then be used for benchmarking. “The employer needs to agree an overarching framework that binds them all together. This can require courage,” Wreford notes.

It is also essential to select the right peer group to benchmark against, based both on the nature of the employer, and its reasons for undertaking the exercise. “A national [employer] might want to ensure its reward strategy is in line with the sector, but a smaller firm may prefer to compare against other local [businesses] which compete for the same staff,” explains Karl Ellis, director and lead consultant at Essential Benchmarking and Reward Solutions (EBRS).

Information gathering

Although pay surveys are widely used to gauge employee satisfaction and market standards, other elements of the reward strategy may require more detective work. “Do some research on the competition,” suggests Ellis. “Request job information and look on Glassdoor. This can give good insight into what it’s like to be an employee at another organisation.”

The quantitative nature of many aspects of pay and benefits are relatively easy to compare, but the more qualitative elements of total reward can pose problems. Brett Hill, managing director at The Health Insurance Group, explains: “An employer needs to look at common elements, for instance gym membership, on-site health screening [and] healthy eating programmes, but also the demographics of the workforce and the communication strategy around it. The value of a comprehensive programme isn’t very high if no one uses it.”

Thinking of the employees

Conducting a benchmarking exercise will, if successful, identify any areas in which the organisation’s benefits fall short. As well as making external comparisons, it is also important to canvas employee views to see whether the total reward strategy meets their needs.

“Run focus groups with staff and key managers to understand what motivates them,” Ellis says. “This can also support the communications programme.”

One method of gathering useful feedback is by asking staff whether they would prefer one benefit over another, says Wreford: “Asking them to choose between rewards, such as increased flexibility or a 5% pay rise, gives an employer a good understanding of their preferences and priorities. This insight can help to reshape the total reward strategy.”

It is also prudent to be forward-thinking. John Dean, managing director at Punter Southall Health and Protection, explains: “Employers need to think about the future workforce. They should consider the type of people they want to attract and the reward [these candidates] will expect.

“Rather than focusing on what everyone else is doing, a more progressive [organisation] will be setting the standard with its total reward strategy.”

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