4 Trends That Put Reward at the Heart of Talent Management

Compensation & Benefits strategies are again becoming central to organisations’ attempts to attract, retain and engage the people they need. After a few years in which budgetary constraints have helped limit the scope for creativity and flexibility in the way businesses reward their employees, who in turn have often prioritised job stability over greater rewards, the need for an approach that recognises performance and promotes wellbeing has become central to both talent acquisition and employer brand.

Skills gaps amidst an improving economy are leading to talent becoming more mobile, and looking for rewards that recognise their skills, varied life stages, priorities, preferences and expectations. This has encouraged a greater flexibility around the range of benefits and initiatives offered, and in the way that they are accessed. Companies are beginning to realise the importance of differentiation as a recruitment tool. A recent report from Top Employers Institute found 53% of participating organisations using the rate of acceptance of job offers as a way of evaluating the effectiveness of their rewards strategy. This strategy is also being used to drive organisational culture, underpinning the behaviours and values that the business wants to promote to encourage engagement. The same Top Employers Institute report showed 75% using the findings from exit interviews to evaluate effectiveness.

The salaries and rewards on offer are more visible now. Review sites such as Glassdoor allow employees to post information about the packages on offer, giving job seekers a chance to benchmark the companies they apply to. Many look for a transparent, modern rewards strategy that will both incentivise and reward them. There is now greater internal transparency around HR processes such as Performance Management and Leadership Development, and Compensation & Benefits is becoming no different. In a competitive recruitment market this can either be a huge advantage or create a problem for some companies.

Rewards are clearly becoming less about HR administration and more a core part of HR’s Talent Management strategy, and these are 4 of the trends shaping that journey:

Salary and Skills

In recent years some increases to basic pay have been fairly generic, with employees getting a flat annual increase often based around organisational performance, but the concept of greater differentiation in salary, particularly to reward top performers, is now firmly back on the agenda. With a more dynamic, ongoing approach to performance management emerging, individuals can find their pay also linked to displaying values and competencies, as well as achieving performance goals. For some companies though this is still an emerging trend, as the Top Employers Institute report found 77% of participants still linking pay increases to inflation.

Those employees with specialist, hard-to-find skills, who are performing in roles that are not easy to fill, are firmly in line for higher pay. They need to be retained in the business and can benefit from companies realising the cost (both financial and through lost productivity) of losing them. Specialist roles, especially those providing services in high demand from clients, are carrying a premium.

Total Rewards

Salary remains important but a growing number in the workforce have preferences and motivators that are not purely cash related. Many look for initiatives around personal development, wellbeing and flexible working as they seek a work-life balance that suits their lifestyle and personal goals, irrespective of age or background. Development opportunities, particularly offering the chance to learn new skills and improve, or to gain diverse work experiences, are attractive to a younger generation of workers who view career progression more laterally than their predecessors, whilst older employees who continue working look to fine tune newer skills and lend their knowledge and insight to help businesses develop a competitive advantage. This leads to a new suite of rewards being offered, though the more traditional benefits, such as health cover and pension, remain part of the mix.

Many companies now offer a range of incentives and initiatives aimed at meeting these needs, allowing employees to select the benefits that are most important to them. The most popular way to enable this is through the operation of a system known as the ‘cafeteria plan‘ in which employees pick and choose the parts that will make up their benefits package, as if from a buffet. They may have a budget to work within though…this is unlikely to be an ‘all you can eat’ buffet.

Recognition

As businesses use rewards to try and promote the behaviours that underpin their values, recognition is becoming a key component in the creation of a culture based on mutual respect and appreciation. This helps towards fostering greater collaboration and teamwork. Recognition is usually a small cash amount, but increasingly also a non-monetary award, that recognises successful results or a colleague who has gone the ‘extra mile’ above and beyond their remit to help or support others in the business. Unique business contributions that are not recognised elsewhere in compensation strategy can be recognised and rewarded here.

Initiatives around recognition contribute to the overall employer brand and can help position companies as employers of choice. Employees often showcase these awards (particularly the non-monetary ones) through social and digital platforms, helping to amplify positive sentiment around the employment experience.

Identifying Value

To gain maximum benefit from newer Compensation & Benefits initiatives within the wider Talent Management ecosystem, companies need to be able to demonstrate and communicate internally the value of many of the new suite of rewards that are on offer. Some companies are providing Total Rewards statements to employees that tend to show the cost to the business of the rewards that the employee has taken. To identify value is much harder. Benefits such as flexible working may be difficult to quantify but if these are to be a key component of attracting and retaining top talent then an effort needs to be made to attach some value. Similarly the value of training and development initiatives need to be shown not as purely the cost of investment, but the real value gained from skill development and enhancement. This is an emerging trend, so many businesses have yet to identify the best way to do this, however failure to do so may limit the effectiveness of the Total Rewards offering as an attraction and retention tool.

The move towards a more individualistic and holistic offering helps to give employees the feeling that they are more in control of their rewards and can tailor the benefits part of their package to suit the differing needs and preferences as their life stages develop. Whilst benchmarking and surveys may currently be the way most organisations evaluate the success and effectiveness of their rewards schemes, the emergence of the rate of acceptance of job offers for measurement marks a shift towards recognising the importance of Compensation & Benefits as a recruitment tool. Eventually the true value of the current emerging trends in rewards will probably be felt in improved levels of the less measurable engagement, retention and productivity.