Companies have long faced the daunting task of managing labor costs while attracting and retaining key talent. Today, there are specific pressures that they must address. Salary budget increases are at their highest point in two decades, and global healthcare cost increases are nearing double digits. Some companies find it challenging to keep pace with the basics in their total rewards, let alone consider something bold and innovative.
Striking the perfect balance between cost efficiency and employee satisfaction takes listening and creativity. Leading organizations are, in fact, seeking innovative strategies to optimize their total rewards, even in this challenging environment. Here are some actions to consider:
Reevaluate the portfolio with an open mind: To spend money where it counts, take a fresh look at your total rewards based on workforce and business needs. Considering program changes and enhancements can be difficult, particularly when cost pressures limit the willingness to change. Yet by eliminating underappreciated programs and readjusting offerings, it becomes not only possible but also necessary to contemplate enhancements.
Employee listening strategies and data analytics give companies valuable insights into employee attitudes, behaviors, needs and preferences. This knowledge empowers them to align their total rewards offerings and prioritize what will attract and retain the talent they need most. One robust way to gather employee input is to conduct a conjoint analysis, or Total Rewards Optimization survey. In this type of survey, respondents are asked to make a series of trade-offs among pairs of choices. This generates a rich set of data to inform decisions.
Total Rewards Optimization surveys often reveal that organizations can achieve cost efficiencies without sacrificing employee engagement, and in fact, can even enhance employee engagement without incurring additional expenses. After fielding surveys, one WTW client learned their employees want more of a focus on financial wellbeing and time off. The addition of student loan assistance and a volunteer day were paired with employer savings in health benefits. Because these changes aligned with how employees prioritized them, the perceived value of total rewards increased above industry norms while saving money for the company.
Holistic employee listening is key, especially because utilization in itself does not provide a full picture of employee value. For example, while cancer support may be used by only a small group, others see value in knowing it’s there. Employee listening also sheds light on how pay, benefits, and wellbeing programs are valued relative to other components of the broader employee value proposition, like career opportunities. Another WTW client, a global customer service organization with retention challenges, was originally prepared to change compensation and benefits. Instead, after gathering feedback and examining the employee experience, they were able to increase retention by nearly 30% over six months, through an enhanced career development program and team manager training.
At the same time, employee preference is not the only lens to consider in optimization. Viewing total rewards holistically considering business goals and future transformation strategy helps complete the picture. For example, for a business with an intentionally transient workforce, long-term incentives or retirement benefits designed to encourage long tenure may not be fit for purpose. Employers going through transformation may consider whether the offering that attracts their current talent is the right offering to attract the talent they need for the future.
Prioritize employee wellbeing: Organizations are increasingly recognizing the significance of employee wellbeing on business outcomes. It’s more than reducing healthcare claims. Research continues to show the correlation of emotional, financial and social wellbeing on employee performance, and the importance of wellbeing to both psychological and physical safety at work. And, organizations that prioritize wellbeing have consistently outperformed the average organization.
Including wellbeing as a crucial part of the total rewards portfolio means integrating it into other programs, including worksite safety, as an interconnected whole. Even with little or no extra spend, enhancements can be made to support employee wellbeing. For example, ensuring employees can navigate easily to the programs and supports that are already in place will improve wellbeing outcomes. Making it an imperative to use paid time off programs to take a break and re-charge will help curb burnout. Most essential is a multi-dimensional approach to employee wellbeing, one that goes beyond benefits to embed wellbeing into workplace culture.
Take a new approach to increasing appreciation and use of total rewards: While the concept isn't new, the tools and approaches are increasingly innovative. Employers are investing in technology and communications to enhance total rewards awareness and understanding so employees fully value the current offering. Some WTW clients accomplish this with personalized communication via digital platforms. This allows them to tailor total rewards messaging to individual employees. The value of each employee's benefits and rewards is emphasized based on their life stage, pay level or other factors (for example, student loan assistance, family-forming or elder care benefits, catch-up retirement contributions or deferred compensation programs). Dynamic, personalized and intuitive communications make it easier for employees to see what programs and benefits are most relevant for them, and how to make best use of them.
Consider the impact of return-to-office or flexible work policies on total rewards: Many companies are navigating the intricate path back to the office for employees that have been working remotely. Policies about where employees must accomplish their daily work are part of the overall value proposition, and employees may expect other parts of the value proposition – including total rewards – to compensate them for changes in flexibility or work location. Costs of childcare and gas have increased since 2020, when remote work began for many. Bearing more of these costs today, employees may request additional compensation or subsidies. By assessing the impact of return-to-office policies on the employee value proposition, employers can tailor employee communications and weigh adjustments to the total rewards portfolio, if appropriate.
Amid the backdrop of continuing cost pressures, it's key that the total rewards offered align with employee preferences and needs, as well as business goals. Embracing ever-changing conditions today can mean competitive advantage in the labor market tomorrow. Now is the time to go beyond the basics, be creative and enact a total rewards strategy fit for the future, one that endures both in cost and in employee appeal.
A version of this article appeared in Workspan on March 22, 2024. All rights reserved, reprinted with permission.
