MappIng the change in rewards trends for 2017

As the current financial year comes to an end, most companies are geared to enter into a phase of restructuring their Total Rewards strategies. But given the recent global shifts impacting the markets like the Brexit, election of Donald Trump as the US President, and the recent move to demonetize currency in India, organizations will have to factor in such global developments while designing their total rewards strategies. As Preeti Chandrashekar, India Business Leader - Benefits, Mercer India explains, “2016 was quite an eventful year from a global standpoint. Among other things we saw Brexit, a change in leadership in US, demonetization back home. All this would be affecting different industries differently.”  

In 2017, rewards professionals will have to look at creating the right reward strategies while keeping market and business restrictions in mind and ensuring higher efficiency. With a global positive sentiment on India’s economic growth, it is expected that there will be job growth that would eventually lead to a rise in compensation structures. However, there is a word of caution as Shanthi Naresh, India Business Leader for Talent Consulting and Information Solutions, Mercer states, “There is considerable optimism about the Indian economy and job growth. However, our research also indicates that the Indian job market will experience significant shifts in terms of the jobs/skills that get added. Some jobs and skills may even become redundant. Consequently, the need for a dynamic differentiated/segmented rewards strategy to attract, build and retain talent emerging or niche skills will be important.” This points towards the increasing role of market forces along with shifts in talent preferences and incoming technology, in the form of AI and robotics, in how companies look at rewards to engage and retain employees. 

During the People Matters Total Rewards Conclave 2017, the trends in place for 2017 were further expanded upon by Shanti Naresh and Preeti Chandrashekhar from Mercer who shared their views on the changing spectrum of rewards in 2017. However, in order to understand what 2017 holds, it will be necessary to look closely at the interplay of different economic forces, especially in the case of compensation. 

Shanti in her keynote made a key prediction, and stated that, “The projected increase in the annual incomes across industries would mostly be around 10 percent, a figure that has remained constant since 2014, albeit having minor industry differences.”  Attributing this to the result of opposite forces, Shanti pointed out that, “Although inflation rates have gotten lower, a constant year-on-year increase within compensation can be attributed to the increasing number of jobs that companies create by the virtue of their business expansion.” A closer look at the interplay between the economic forces of GDP growth, inflation and their consequent result on the wage increase reveals that although inflation has been relatively falling since 2014, by virtue of rapid expansions by companies across industries has meant that more and more jobs are getting created every year. This creates an increased pressure within HR professionals to provide the right compensation to retain talent.  

Shanti continued to say that “The other reason behind this is a relative stable growth of our GDP as well, and as a result, the global sentiment around increase in compensation has been quite positive for a country like India. And the sentiment would remain quite similar moving ahead into the new year.”  The robust growth of India’s GDP has, to a large extent, ensured that jobs are being created, which in turn reflects a competitive compensation growth for companies to attract and retain talent. This has been able to offset the expectation of a low salary increase due to inflation. 

Although compensation is bound to be a key attribute of a company’s Total Rewards package, the scope to innovate and create new industry standards is fairly less within this space. Shanti pointed out that, in parallel, employee preferences are also evolving and company’s rewards strategy should reflect that. “The importance employees place on the organization’s investment in building their skills and the growing importance of employee perception of the organization as caring about their and their family’s well-being are the two key shifts in talent preferences overall.”  She went to point out that, “Given the multi-generational increasingly diverse workforce, talent preferences are unlikely to be uniform across all employee groups in the organization. The need to therefore understand these differences and adapt the rewards strategy to what matters to each distinct group is critical.”  

There is consequently the need to think beyond the obvious compensation increase to retain talent. One way to do this has been for companies to focus on their benefits program. A recent Mercer study revealed that CEOs top preferences when it comes to their workforce is to firstly have a capable workforce which can successfully contribute to business growth, and then to have them highly engaged. “This demand,” Preeti adds “is reflected in the top expectations of employees within India which, besides increase in compensation are around good learning opportunities and provision of flexible work options. Both of which can be successfully integrated into a company’s work culture without touching the compensation aspect.” 

To be able to design a holistic rewards program, companies need to think holistically.  Preeti adds that “companies need to draw insights from various sources like market benchmarking, internal utilization, employee perspectives as well as optimize costs.” This points towards the increasing pressure within rewards professionals to look beyond set examples of rewards strategy and to look at where innovations can be brought into the benefits space. In order to do this, rewards professional would need to move beyond the general ‘hygiene activities within wellness and benefits practice. 

In order to successfully leverage the opportunities that the benefits piece provides, companies need to look inside rather than outside for solutions. By looking within their own organizations, rewards professionals stand a better chance of creating benefits options that are personal and contextual to the business context in which they operate. Also companies need to use analytics for the purpose of designing company benefits program as data-backed benefits program would help companies design their rewards program and leverage the most of what the benefits space can offer. 

(As told to Dhruv Mukerjee)