In order for organisations to get the ball rolling, they need to successfully move the view of reward from just being about base pay and onto the total reward package. This is definitely one of the hardest parts of a reward and benefits implementation, as it requires confidence and buy-in from all areas of the organisation as well as external bodies such as the unions.
Specifically, HR, IT, Finance and Pensions will have to liaise and work together, and in some cases make alterations, to the way they communicate and work together. This is definitely a good thing, as in the long run teams will have broken down silos and replaced them with a strong network across the organisation.
Understanding what employees want from their employer sounds simple enough on the surface, but it is often a nightmare for companies to break it down into specific components. From my experience of analysing the outputs of various engagement surveys, employees often feel that they are not compensated fairly and do no not understand their pay package.
This is because many companies are operating with an old fashioned pay structure and are not perceived as being transparent with the salary package and how it is determined or the criteria used for making pay decisions. This can lead employees to feel disengaged and could also account for low survey response numbers if they see no improvement.
A best practice reward and benefits strategy allows the individual to see their total reward package breakdown clearly and gives them control over key areas such as benefits. By deemphasising base pay – which is maybe more cost effective for the employer – and offering the individual rewards and benefits alongside their salary, they are actively showing their staff that they are attuned to their needs and able to help accommodate a variety of lifestyles, from students to first-time parents or those nearing retirement.
By doing this, reward transformation can help companies not only deliver a sustained reduction in attrition by focusing on the employee/employer contract, but also achieve a more positive performance with stronger feedback from engagement surveys.
We will also see best practice businesses increasing the take up of benefits that are in line with the values of their organisation. This allows employers who take the time to analyse the choices that employees make with their packages to effectively tailor the range of benefits on offer and market this to potential job seekers .
In five years time we could be seeing more smaller companies carrying out reward and benefits transformations and enhancing their offering. Although bigger organisations will typically have more financial means and available resources, smaller companies will have fewer institutional barriers to break down and fewer key stakeholders to convince.
It may, however, take smaller companies longer to execute and the resulting reward and benefits scheme will likely differ from a larger organisation’s structure. But ultimately the challenges will remain the same for all organisations: resourcing, managing new expectations in the daily routine and tiding over existing project legacies.
If companies aspiring to be “best in class” are able to implement reward transformation effectively, I believe that in five years time we will be seeing the profile of the HR and Reward function raised, both internally and externally, by clearly demonstrating that they add bottom line value to the business through their alignment to company strategy.
Ingrid Waterfield is Reward Senior Manager at KPMG in the UK