Total reward strategies include all types of financial and non-financial, direct and indirect, intrinsic and extrinsic rewards, and play a crucial role in attracting new employees, eliciting strong performance and maintaining engagement. The application of such strategies contributes to employee wellbeing, satisfaction and productivity.
However, economic turbulence, such as the global financial crisis or context-specific issues like Brexit, often impacts on the ability to provide financial rewards to employees. Downsizing, salary cuts and wage freezes have been shown to be the most frequently cited cost-cutting techniques implemented when organisations are faced with an adverse economic environment.
The outcome is a workforce characterised by job insecurity and work-related stress, leading to a decline of employee satisfaction, motivation, and ultimately job performance.
So, how can organisations overcome the limitations a turbulent economic environment imposes on their ability to provide financial rewards to their employees?
Research published by myself, Alexandros Psychogios and Yllka Rexhepi in February 2016, Rewarding employees in economies under crisis and transition: The application of the total reward model in south-eastern European SMEs, found that a better work environment is positively related to increased organisational performance.
When HR budgets are limited, non-financial strategies can be a viable alternative to costly financial rewards. Strategies such as work-life balance practices, employee involvement voice mechanisms and an organisational culture supporting personal and professional development can all offer solutions. Organisations can use these strategies to maintain employee performance, even when financial rewards are limited.
Dr Rea Prouska is associate professor of human resource management at London South Bank University