Over the past 18 months the world of work has changed immensely. The Covid-19 (Coronavirus) pandemic has altered not only our patterns of working, but also the expectations employees have of their organisations.
The workforce has adapted to become more agile and flexible, but in order for employees to stay engaged, policies need to adapt as well.
The holistic benefits package offered by a business to its employees, or total reward, is crucial for businesses to get right. In Aon’s recent Future of total reward, published in October 2021, it found that a higher value of total reward increased engagement by 33%. Higher engagement in turn increased productivity by 17%.
So, as the workforce is adapting, how is the future of total reward also changing and what do businesses need to do about it?
The future is flexible
There have been several changes across the workplace, some of which have grown exponentially over the past 18 months, that demand flexibility from employers and their benefits packages.
One example is that the workforce is an increasingly ageing population. The average retirement age has increased from 63.1 for men and 60.6 for women in 1995, to 65.3 and 64.3 respectively by 2019.
This change presents problems for employers, such as stagnation, increased risk of health insurance claims and lack of talent attraction.
In Aon’s Total reward survey, business leaders rated their effectiveness at addressing this issue at just 35%.
But with flexibility, such as a phased retirement programme whereby employees can scale back their hours as they enter retirement, and plan for succession at the same time, employers can avoid these issues.
The development of the sandwich generation also requires some flexibility and impacts employees’ capacity to work, with many more likely to have caring responsibilities for both older parents and young kids at the same time.
However, some are just choosing greater flexibility, with around 4.7 million workers in the UK classed as gig workers as of 2019 in a TUC study, published in June 2019. Many workers have also embraced the flexible working first mandated by the pandemic, with Aon’s Future of total reward survey suggesting that 86% of organisations are creating or considering an update to their remote work policy.
In all, total reward needs to consider this desire for flexibility: whether by the breadth of rewards offered, the structure of the programme or how they are delivered to employees.
Many employers already offer flexibility around benefit access, with some offering the opportunity to tailor their benefits to suit individual needs, but employees want more.
Around 75% of employees want more choice and control over how benefits money is spent, according to Aon’s Total reward survey, with 80% saying they would remix their compensation from what it is today.
Responsible and responsive
Alongside flexibility, total reward also needs to be responsible. There has been a rise in focus on wellbeing and health for a number of years, and the pandemic has shone a spotlight on those with pre-existing conditions who were asked to shield to reduce their chances of catching Coronavirus.
The past few years have also seen conversations about racial injustice, gender disparity and the effects of climate change increase.
Employees are now expecting their businesses to be more responsible and responsive to the needs of the individual.
However, only 53% of employees think their organisation’s total rewards package is currently inclusive and meets the needs to employees with diverse needs, lifestyles and backgrounds, according to Aon’s Total reward survey.
As regulators and institutional shareholders have been seeking additional data on environmental, social and governance (ESG) practices, there is also increased scrutiny in this area.
Rewards packages need to take this into consideration. They need to align with equitable reward practices and be inclusive in design. To be caught without this could be a significant disadvantage in both relationships with stakeholders and employees in the future.
Where to start
With the changes of the past couple of years being so vast, it’s crucial for businesses to assess their policies and make sure they align with their workforce. Each employee and organisation will have different needs, so businesses need to form a strategy based on their people and their values.
Starting with a data-driven approach to find out what employees need and want is the best way to set up for a successful total reward package. It then needs to maintain that flexibility and agility to adapt with the workforce and ESG principles as they shift. It should go through a process of continuous improvement, because only then will it stay relevant for the future of the workforce.
Total reward should be flexible enough to align with organisational performance; first so an employer can ensure they can afford these benefits, and second to act as an incentive for employees if their package develops as the business grows.
But employers should also treat total reward packages like any other business transaction, by looking for the competitive advantage. Differentiating between another total reward package does not necessarily mean offering more. It could mean being more flexible, more responsible or more agile. Or, it might have the best communications strategy so employees know exactly what they are getting.
Often businesses worry about how to prove that the investment is worth it. But using the right technology here can help facilitate these metrics and build a picture of how total reward is impacting and benefiting the company.