Flexible benefits gaining popularity: Report
The significance of variable pay and flexible benefits can be observed to be increasing with the revelation of a radical compensation mix highlighted by the latest TeamLease Compensation & Total Rewards Trends Report. The mix includes 60 percent to 40 percent fixed-to- variable and 38 percent to 85 percent intangible-to- tangible. As catering to the holistic needs of employees becomes imperative, the spending on recognition has increased to 52 percent of benefits budgets and to 55 percent in the case of privilege. The report with its interesting findings indicates the transformation of business where fun, finance and wellness are being brought together through a comprehensive Total Rewards strategy. Here are few highlights of the report:
Variable pay and long-term incentives gain more currency as one goes up the hierarchy
The variable pay for Senior Management has risen to 25 percent to 30 percent from 18 percent to 20 percent. This percentage increase in the share of variable pay and flexible benefits is not restricted only to the senior management, for the middle management it has gone up to 18 percent- 20 percent from 10 percent-12 percent and for the junior management from 5 percent -8 percent to 10 percent -12 percent. The report indicates executive compensation to be heavily loaded with components comprising of almost half the total compensation, right at the top. For a mid-management employee, the actual average variable pay stands at 15.1 percent while the same for a CXO is 22.8 percent.
Variety of benefits in the traditional sectors and lean benefit structures in new economy businesses
Interestingly, a wide range of options in the Compensation & Benefits mix is being offered by the traditional sectors like manufacturing, healthcare & pharma, BPO/ ITeS, to the diverse workforce. While the new economy businesses like BFSI, e-commerce, IT, telecommunication and FMCG/D have rationalized the benefits mix by stripping it of elements that employees perceive as irrelevant. Also, sectors like retail, media & entertainment, travel & tourism that are seen to be fun places to work at have a lean compensation & benefits structures.
Professional development and educational benefits are the most preferred benefits
A percentage of 43 percent employees chose professional development and educational benefits as the most important benefit. Pay raise was the second most popular choice with 26 percent respondents opting for it. Healthcare plan and performance bonus are the other preferred benefits. For indispensable elements of total rewards 87 percent candidates ‘preferred personalized healthcare and insurance plan, 67 percent opted for career advancement opportunities and almost 62 percent chose flexible working hours, vacation and telecommuting.
Benefits plans are crucial for attracting and retaining employees
Benefit plans while joining the organization attract 74 percent of potential employees and health and wellness plans along with financial benefits help retain 57 percent of people. 68 percent prefer flexi rewards, WFH, and insurance plans as a satisfaction driver and 55 percent employees are likely to recommend the organization on the basis of maternity/paternity benefits, performance bonus and stock options availability. Another interesting highlight is how the reward value retention is perceived differently by employees and the employers at different stages of the employee cycle. While attracting the employee to a new job, the employer thinks of career advancement opportunity as the most important criteria for an employee but the base pay is what attracts him/her to the new job.
Commenting on the report, Ms. Sonal Arora, Vice President, TeamLease Services, said, “While flexi benefits have become a popular medium to please and retain employees, organizations need to be honest with their intent, put earnest effort and prioritize on aligning rewards with business objectives, communicate effectively and personalization.”
As variable pay and flexi- benefits continue to gain momentum, they seem to be yielding higher value amongst employees, lower costs for employers and better tax benefits. While the cost to the business in providing flexible benefits is 25 percent of the total HR budget, the perceived value of these benefits is nearly 42 percent of the compensation package and hence new-age companies are innovating in every way to bring in the employee delight. It is also interesting to note that with nil impact of GST on gifts and perquisites, and little impact on most other components flexi-benefits potentially increase net income for employees by 28 percent.
The report has further validated the increasing significance of variable pay and flexible benefits and how it can be an essential tool for creating a robust employee value proposition. From attracting to retaining employees an effective, personalized and holistic total reward strategy can come in handy for the entire employee lifecycle.