Need to know:
- A successful total reward proposition should reflect employee needs on an individual basis, rather than simply being segmented by demographics such as age.
- An employer’s core culture and values should underpin and align with its total reward strategy.
- A social contract can help build transparency, ensuring that employees know what is expected of them, and what they will gain in return.
Workforces are becoming increasingly diverse, thanks to flexible working, the gig economy and the growing acceptance of differing working patterns and career paths; this presents employers with the challenge of finding the most effective ways to attract, retain and engage employees.
To this end, many are focusing on their total reward proposition, seeking to tailor and personalise it to meet the needs of a modern workforce.
However, The rise of the social enterprise: 2018 Deloitte global human capital trends report, published in March 2018 by Deloitte Insights, found that many are failing to deliver this effectively. Nearly two-fifths (37%) of respondents rated reward as very important, yet only 8% said that their proposition was very effective at creating a personalised, flexible solution.
The total reward dilemma
An effective total reward proposition should be tailored to employee needs and goals, in addition to recognising the importance of wellness, career progression, the work itself and the workplace, rather than just financial components. This breadth of boxes to tick makes tailoring total reward a tall order.
Dr Duncan Brown, head of HR consulting at the Institute of Employment Studies (IES), describes an individualised total reward as something that is easy and attractive to say and promote, but fiendishly difficult to deliver.
He says: “Rather than genuinely motivating [staff] by delivering higher levels of flexibility and perceived value, the concept is often used as a front to cut pension and benefit costs and shift all of the risk from employer to employee. Complexity and poor communication often confuse employees and obscure the real pay declines experienced by most of the UK workforce since 2008.
“Total reward is about what employees perceive and receive, the employee experience, and not what employers provide and push on them. It is about best fit, not best or supposedly leading-edge practice.”
Employee need
So, how should employers create a proposition that takes into consideration the needs of a diverse workforce, but also aligns closely with the organisation’s culture and values?
The starting point is to understand what it is that employees really value, ensuring that the time and financial resources invested in reward programmes are effectively used to meet those needs and deliver maximum motivation and engagement.
The next stage is to develop a rewards strategy that is underpinned by the organisation’s core values and culture, says Debra Corey, group reward director at Reward Gateway: “This ensures alignment between what the values say and what the reward programmes do, thus driving engagement with the workforce.”
Offering choice
Employers should build balance and choice into all elements of their total reward proposition, Corey explains: “For example, instead of giving employees discounted gym membership, can [employers] offer a holistic wellbeing solution that provides support with physical, mental and financial wellbeing?
“The old one-size-fits-all approach to rewards no longer works. People have different needs, and businesses need to address them through their reward proposition if they hope to retain and engage them.”
Where many organisations tend to go wrong is in the segmentation of the workforce, warns Nick McClelland, director at JLT Employee Benefits.
“Too often this is based on demographics such as age or even location,” he says. “In doing so, the [organisation] feels it is achieving a personalised approach, but personalisation is about individual needs and motivations. It is not about fitting into a certain demographic. It is becoming increasingly clear that the assumptions we make, for example based on age, are flawed.”
Just as potentially false assumptions are often made based on characteristics such as gender and age, McClelland argues that employers should also be wary of leaping to incorrect judgements about what will be perceived as valuable by the employee, and why.
“Too many total reward propositions are built on the premise that employees will feel truly valued by the business because it spends £600 on private medical insurance (PMI),” he says. “Of greater value to the employee is an understanding of why PMI is important and the role it plays in times of need.”
Understanding not only which products are wanted most, but also why they are important, might mean the difference between an effectively tailored communications campaign, boosting take-up and engagement, and one that misses the mark by focusing on the wrong value points.
Technology as a support
Technology plays a central role in the development of and communication around a total reward proposition, with employers increasingly using online platforms, mobile apps and other modern tools to engage employees.
Technology can allow staff to truly understand their benefits package as a whole, seeing it all in one place and easily navigating around their offering, as well as provide them with a user-friendly method with which to tailor their own rewards to personal wants and needs.
Employee services provider Personal Group, for example, has developed an engagement app called Hapi, which can be incorporated into an organisation’s existing benefits platform. Through this, staff can access their payslips, policies and procedures, benefits, and, through the platform’s health and wellbeing section, fair value loans, gym discounts and on-demand GP services. They can also use the app to answer pulse surveys, providing the employer with valuable feedback about how the workforce is feeling.
Recognition and relationships
Employees want their efforts to be recognised and to feel that they are making a difference, not just through formal rewards, but also through public acknowledgements, social events and more informal, everyday recognition. To this end, goals and expectations need to be clear, and methods of reward for achievements should be codified and public.
An effective total reward approach should, therefore, be underpinned by a social contract; this is a commitment from both the employer and staff for transparency, recognition and ongoing support, says John Deacon, head of employee benefits at HR consulting, benefits administration and technology services organisation Buck.
“Both parties establish clear guidelines for personal and professional development, as well as the specific benefits and rewards that will keep the employee motivated,” he explains. “Staff will therefore have a clear understanding of what is expected of them, and will be better able to achieve the rewards on offer. This provides a clear foundation on which to establish an open relationship between staff and senior management.
“By using this social contract, businesses can take a consistent approach to the needs of their employees and provide tailored, total rewards that motivate people to achieve the goals that have been set for them.”