The business environment and headlines of unprecedented turnover of the past year have helped to elevate the importance of differentiating an organization’s employment brand and total rewards to attract and retain the workforce and critical skills needed to succeed. Companies must now consider these factors when changing any aspect of employee compensation, health, welfare or retirement benefits -- or any other reward programs for 2023.
These news stories can create motivation for employees, leading them to think that if they aren’t leaving their current organization, or asking for promotions or pay raises, what other time in their careers would be right? These considerations can be stressful for those leaving a company as well as those who choose to remain. Company leaders are further challenged if they don’t understand the rationale for the organization’s reward programs or if the programs constrain their ability to respond to employee desires.
The statistics behind the headlines are astounding. We have had a record number of employees leave organizations, as well as the workforce in general – a trend that is approaching a year and a half in length. Labor participation rates are beginning to come back from the initial decline. -- companies have reported rates percent of nearly 80%.
The shortage of available labor has been a catalyst for rising wages, leading many employers to allocate their labor costs across cash, non-cash reward elements and creating new additions to their headcounts.
Wages have increased at a rate above 5%, but with rising inflation, that feels more like a loss of more than 3% in purchasing power. Finally, while companies are positioned to begin making programmatic and financial commitments to their future total rewards programs, at least for 2023, they are doing so in an uncertain economic climate where growth appears to be modest at best and other leading economic indicators and a tighter monetary policy could dampen economic growth.
Navigating a path forward
The sample timeline below illustrates what many human resource and total reward leaders are thinking about as they head into year-end planning, deciding what efforts are needed to deliver programmatic changes to reward elements to close the gap on the unmet needs of their workforce.
For calendar-year organizations, July, August and September are very busy months for researching what aspects of pay or benefits should be adjusted for the upcoming year. Companies might increase use of employee surveys, focus groups or other listening programs, as well as tap into external market data gathered in Q1 or proxy disclosures.
Striking a balance – tradeoffs and effectiveness
The window period that employers have to activate any compensation or benefit change, including system and vendor configurations is very narrow. Communicating with leaders and employees in an effective and timely manner to make necessary changes is a challenge, with the risk of a less-than-effective total rewards program at stake.
When considering changes to company total rewards packages, HR and total rewards leaders can use insights identified by Grant Thornton’s State of Work in America survey of the U.S. workforce. This research identified a plethora of work environment desires and widespread employee expectations that can provide guidance on how to tailor rewards packages that both attract and retain the top talent in a company’s field.
The best approach that can drive a strategically different employee experience is one that balances market-competitive practices and cost savings with an organization’s talent strategy and the needs of its current workforce. Any imbalance in these areas can lead to a total rewards program that is less effective than it should be, meaning that choices were made which overlooked some critical considerations before the final programs were operationalized.
Planning for change
Managing changes in employee compensation and benefit programs requires HR and total rewards leaders to prepare a comprehensive action plan that includes:
- Holistic approach — A total rewards reset requires a tailored approach by the audience, including the various aspects of change.
- Moments that matter — A defined plan may not be enough. Creating an engaging environment, conducive to collaboration and productivity is needed.
- Proactive two-way engagement — Communicating expectations early and often provides employees with time to adopt and adapt, while proactively gathering feedback allows organizations to adapt to employee needs.
- Sustained support — Organizations can expect incremental changes to total rewards, highlighting the need to prepare the organization to support and be agile for future changes.
The ongoing talent turnover and scarcity and its repercussions on total reward functions will continue to be significant into 2023. Our State of Work in America research supports this and further documents the talent drain and operational risks that business leaders face. Organizations must look to their HR and total rewards leaders to identify and create solutions to differentiate an organization’s employment brand, as well as proactively identify and respond to emerging employee needs and preferences to engage and retain their valued employees.
These are critical moments where organizational leaders require more than sound program rationales. They need additional insights into the employment needs and desires of their workforce, data that is essential for making decisions about competitive and internally equitable cash compensation, competitive compensation structures, core and voluntary benefits offerings, and elements of flexible work. Forming an action plan now that incorporates each of the four steps listed above can be a good first step for organizations that can use the current workforce upheaval to its competitive advantage.
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