Need to know:
- A reward strategy encompassing different employee profiles should be based on a set of core principles that can be tailored to suit varying employees’ wants and needs in terms of benefits.
- Employers can collect employees’ opinions on what benefits are most valued using employee surveys and face-to-face focus groups.
- Employers may have numerous employee profiles within their workforce, for example office-based head office staff versus employees performing manual work in factories or manufacturing plants.
In March 2018, retailers such as Next and Morrisons came under scrutiny for potential pay disparities between female store-based employees and male staff who work in warehouses or distribution centres within the same organisation.
Although such pay variances may be proved to be unintentional as legal proceedings progress, these cases have thrown light on the complexities employers can face when rewarding different employee profiles effectively, highlighting that workforce profiles should be considered when creating a competitive reward strategy.
Reward principles at the heart of organisational culture
Before employers design their reward strategy, they need to understand their organisation’s history, culture and business context, says Benjamin Viney, reward specialist at Willis Towers Watson. “The first piece is always understanding the business context, the background, the history, the culture of an organisation, the vision, and where the business is going,” he says.
Employers can use this insight to create an overarching reward philosophy. Underneath this high-level outlook, employers should then design a set of core principles that will act as the reward strategy’s main driving force and framework.
Stuart Hyland, partner, talent, rewards and performance at Aon Hewitt, says: “[The core principles] become the thing that all other parts of the business adhere to. It enables [employers] to say, ‘for head office staff we want to vary or interpret the principles in this way, for warehouse staff it needs to be in this way’.”
Viney adds: “[Employers] might have 70% or 80% of the reward strategy the same for all employees, but it’s understanding where [employers] are going to make the biggest, positive difference by having some elements tailored to different parts of the organisation.”
Socio-economic factors
Typically, individuals falling into different employee profiles will come from specific socio-economic backgrounds. This, in turn, will influence their needs and wants in relation to benefits, says Heather Carey, deputy director at The Work Foundation. For example, lower earners may value retail vouchers to make day-to-day living costs more affordable, however, some higher earners may not always appreciate taxable benefits, such as a company car, that may increase their tax bill. “Socio-demographics need to be considered at every stage in the design, implementation and evaluation of the reward strategy to work out how different benefits are resonating,” adds Carey.
The tax implications surrounding some benefits, such as private medical insurance (PMI), may cause concern for lower earners, meaning they may value different healthcare benefits more, says Mark Ramsook, sales and marketing director, health and wellbeing at Willis Towers Watson. This could include a health cash plan or providing on-site services, for example, occupational health, physiotherapy and dental care.
A healthcare trust could also enable employers to tailor health benefits. "For a lower-paid group, [employers] might have some lower out-patient limits, a bigger focus on musculo-skeletal, or a wider range of [options] that might be appropriate for a more manual workforce," adds Ramsook.
Pension provision can also be impacted by socio-economic factors, because lower-paid staff typically place greater value on take-home pay versus retirement saving, adds Ramsook. One solution is for employers to implement a non-contributory pension scheme, where the organisation covers the cost of both the employer and the employee minimum pension contributions required under auto-enrolment.
Depending on an organisation's aims, it could also operate a tiered pensions structure, which facilitates different contribution levels for different employee profiles. Pension schemes can also be tiered to reflect management grades, although these factors may be linked more to legacy pension arrangements. In addition, some employers may choose to operate different types of pension scheme for different groups of employees.
The employee viewpoint
The nature of work performed by different employee profiles can also influence their perception of benefits. “[Employees] in physical roles might benefit more from healthcare benefits," says Carey. "Employees working in roles with a high degree of seasonality or the frequent need to travel will value enhanced overtime pay or paid travel time, for example,” Carey explains.
With this in mind, a number of employers use employee insights to inform their strategies. One way of doing so is to ask staff a series of questions about which benefits they would prefer to receive, for example, would they rather receive a pay rise but fewer bonus opportunities. Such feedback allows employers to see what aspects of reward are truly valued by different workforce segments. “This enables [organisations] to build a total reward strategy that is more likely to maximise perceived value from the perspective of the employees, [while] at the same time taking into account the cost to the business,” says Viney.
Employers should also avoid assuming what different employee profiles will want. Charles Cotton, senior performance and reward adviser at the Chartered Institute for Personnel and Development (CIPD), says: “[Employers should] not necessarily make assumptions about what people are going to want and need. I think [employers] should have flexibility in [their] offering, which allows employees to select those benefits that best meet their needs."
Benchmarking data
A structured benchmarking process can also be valuable when tailoring benefits for different employee groups. Employers can obtain market data from employee benefits consultancies or providers. They can also use external research, provided by research organisations or think tanks, as well as data from professional bodies, local trade journals, sector-specific recruitment consultants or local employer groups.
Employers can also utilise internal data. Employment records will show the make-up of their workforce, while employee forums, staff councils, trade union representatives and line managers can also be useful sources of information. Entry and exit interviews can also provide insight into competitors' reward approaches.
When collating such data, employers may find it helpful to look more broadly across different industries, says Carey. “That’s increasingly more important as we move into a more competitive race for talent,” she says.
Using technology to create a consumer experience
Technology can help create a personalised reward experience for different workforce demographics. This could be delivered as a micro-site that staff can access via desktop computers or via mobile devices, which collates the total reward offering, giving employees exact details relating to their benefits.
Viney explains: “It knows which pension scheme [employees] are in so it can direct [them] to the right pension scheme sites. If [employees have] got questions about [their] salary or bonus, it knows which incentive scheme [they are] in [and] what [their] eligibility is.”
Communication
Employers also need to consider how they will communicate their reward strategy. For example, employees who work in retail or warehouse-based roles are less likely to have access to technology devices during the working day. Therefore, employers will need to use a multi-channel communications approach to reach all employees. This could include paper-based communications.
If employers vary their benefits package to different employee profiles, they should ensure they communicate these variances to staff using a total reward approach that includes all of the relevant options available to each employee.
Employers should also highlight the internal and external benchmarking that has taken place, to clarify why benefits packages may differ. "If an employer is going to differentiate packages between different parts of the group, [it has] still got to make sure [it is] focused on equality and fairness across the business," says Aon Hewitt's Hyland.
Staying true to an organisation's core principles lies at the heart of a competitive reward strategy even where it is tailored to different employee profiles. As Hyland concludes: “[Employers need to] make sure that [these core principles are] held sacrosanct and protected, and that anything [they] want to do for a different employee group still has to come back to being consistent with those principles because that’s how [employers] will reinforce [their] brand.”
Read more...
InterContinental Hotels Group tailors benefits to main employee profile
Nick Campbell: Employers must ensure reward is non-discriminatory
