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28 Feb 2019
by Ruth Thomas

Making reward work for a diverse and flexible workforce

For many businesses today’s workforce is a complex mix of multigenerational workers and employees with alternative work arrangements. Each cohort has different expectations of work and display different employment behaviours.  So it is time to reconsider how reward programmes can appeal to employees with a much wider range of personalities, skills, values, and financial requirements.  With multiple talent models co-existing there is a growing realisation that a one size fit’s all approach to Reward is now obsolete and employers cannot risk alienating any section of their workforce. 

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Reward Segmentation 
Pay structures have traditionally been linked to linear career paths that typically reward expertise and progression up the career ladder.  But career models are in disruption. Many of today’s millennial and the new Gen Z employees don’t want traditional career paths and the Deloitte HC Trends 2017 reported that while 33 per cent of companies promote vertical career moves, 67 per cent now promote horizontal or project based career progression.

There is also a rise in off-balance sheet workers with freelancing, self-employment, gig-working and portfolio careers becoming the norm for many people as the continuum of employment continues to evolve. 

With multiple talent models co-existing inevitably that is going to mean different approaches to pay and reward segmentation. Few organisations are yet equipped to combine all types of workers into a holistic reward philosophy or even start to consider pay equity between on balance sheet and off balance sheet employees. The debated issue of whether companies are using gig arrangements to drive down pay to minimum wage rates is case in point here.  This is leading some employers to undertake a talent audit to specifically identify appropriate reward approaches and how these can be linked to a common set of reward principals and values.  However the reward landscape look is set to be even more complex with the emergence of personalisation in reward. 

Increasing personalisation in reward 
We’ve seen this demonstrated successfully in the benefits arena with the focus on employee choice, but less so in mainstream compensation, where things are pretty much still ‘meat and two veg’ or fixed and variable pay.  But as the employment relationship continues to shift to be more employee centric, our employees are likely to want more flexibility and options in the making up of their reward packages, introducing more choice or even intrinsic reward to the total reward or compensation package.

Just as with flexible benefits where employees typically choose to align their benefit selection with lifestyle stages, the same concept can be applied to cash compensation.  An employee may prefer, given the choice, to take a salary rise rather than a bonus payment because more salary can give them more buying power in borrowing money; or they might prefer to defer bonus pay into longer term investments or pension rather than take cash depending on their tolerance of risk; or they may choose to take an extra week of vacation as opposed to a more modest increase in base pay. In an environment of near stagnant wage growth and weak incentive pay its easy to see how this approach could be more engaging for employees. 

Choosing a scheme that offers flexibility to provide different rewards to different team members proves that you know and understand your staff, it enables you to give a truly appreciated and therefore worthwhile reward package that can maximise impact. Ultimately each employee is unique and may have a unique compensation thumbprint.

Real Time Reward 
The other area where more flexibility in reward should be considered is the traditional annual approach to pay award allocation or adjustment.  With the traditional models of performance management being challenged and more employers moving to ongoing approaches to talent assessment is it time Reward followed suit.  The Deloitte 2018 Global Human Capital Trends report noted that their research showed that whilst 76 per cent have reinvented performance management to be more continuous, 91 per cent  of companies still follow the utterly conventional practice of conducting salary reviews only once a year—or even less often.

It is inevitable reward allocation will move to a more continuous approach. Managers want to be able to benchmark their employees on an on-going basis and allocate awards when the effort takes place and to be more in line with project, team and skills based approaches to working.  Real time reward is more effective when it comes to a point in time response to a market threat, or addressing a pay equity adjustment or recognising exceptional performance or behaviour. 

The new reward complexity
With increasing diversity, personalisation and frequency, reward is set to get more complex.  It will be a significant challenge for many to account for employee preferences whilst ensuring reward still encourages behaviours in line with company values.  Managing individual employee elections whilst tracking pay equity will also require more robust analytics. So we will need technology that can provide real time insight, with up to the minute benchmarking data and the ability to track budget throughout the year whilst also managing employee choices around the type of compensation package that works for them.  

The author is Ruth Thomas, Senior Consultant, Curo Compensation.

This article is provided by Curo. 

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