If there is an area of work that has undergone a complete metamorphosis over the last few years, it is Total Rewards. As employee sensibilities have undergone a tectonic shift, with people choosing to focus on a work-life balance, employers too have had to rethink how they reward their employees and keep them driven and engaged.
To start with the basics, total rewards can be defined as the sum total of an employee’s compensation, benefits as well as rewards. Total rewards also take into consideration components such as recognition, career opportunities so it can be seen as a combination of both financial and non-financial incentives.
The many disruptions that hit the world of work – from the coronavirus pandemic to generative AI – have fundamentally changed how Total Rewards are now viewed. While there was a time when most employee issues could be resolved by making adequate changes in take home pay, today employee happiness means ensuring the Total Rewards package checks all the right boxes. And here is where a sound Total Rewards strategy comes into play.
Speaking about total rewards and its correlation with employee engagement, Nitin Sethi, CEO, of Aon Consulting, India & South Asia, spoke to People Matters on how having a sound total rewards strategy can be a gamechanger in today’s world of work.
There are three major aspects of total rewards:
1) Enabling Business Strategy and Performance
A total rewards strategy must be created keeping primary focus on the organisation’s business strategy and what kind of outcomes it wants to achieve. The logical next step is figuring out what needs to be incentivised to achieve these goals.
2) Clear Employee Value Proposition along with Differentiated Rewards
There is a theory on how different personas come to work and how every persona views their work differently. Hence, instead of one-size-fits-all, there needs to be a more customised, differentiated approach to rewards.
3) Promote Equity and Fairness through Transparency
Every employee, irrespective of their designation, job role and vertical, wants to be compensated fairly for the efforts they are putting in at work. This kind of equity and fairness can be promoted through transparency regarding compensation and by carefully explaining to the employees all aspects of their total rewards package. Communication can be key in achieving this.
Total rewards does not mean cash
“I think one place where a lot of organisations falter, when it comes to their total rewards strategy, is that they think total rewards equals cash. The only guiding principle here is that total rewards are not cash,” Sethi said. There are so many more levers that organisations can operate to create a better and far more effective total rewards strategy than simply focusing on cash benefits or the financial aspect of their total rewards strategy.
“I can assure you that salary stops being exciting very, very soon!” Sethi noted. “A couple of months into the new job, there are other things that immediately start holding more value – it's about your manager.”
“In their rewards framework, companies need to focus on, say, what kind of experience a job will provide to them through the expertise and leadership of their managers and leaders,” he added.
Long after an employee stops getting excited by the amount of salary they are receiving month after month, it is the motivation that the job and the people they work with that is bound to keep them going.
Sense of purpose
What the modern employee expects from their jobs today is very different from what the traditional employee of yesterday wanted – or needed. While the traditional employees looked at a job as a means to provide a good life for themselves and their families, the modern employee expects and demands much more. And one of their primary demands is finding a sense of purpose at work.
“Sense of purpose is a part of the total rewards package that organisations need to create to attract the best of talent,” Sethi observed, emphasising on its importance.
Being your own, unique self
With most companies attempting to calibrate their Total Rewards strategy towards the modern work landscape, how can an organisation stand out from the competition? The short answer: by focusing on what differentiates them from the rest.
"Is your organisation all about the kind of learning or growth you provide your employees, is it about the kind of benefits program that you have, or is it about being a great, inclusive, diverse place to work," he said, adding that once an organisation understands what its unique value proposition it, it can tailor its rewards strategy more effectively.
This can be further enhanced by understanding employee concerns better and contextualising rewards using people profiles. Sethi added how companies are increasingly considering “different personas” that come to work. “By identifying an employee’s unique needs and avoiding a one-to-many approach, different kinds of reward elements can coexist,” he explained.
In a world with rapidly evolving employee preferences and "a breakdown between what employees want and employers provide," as Sethi puts it, companies building relevant total rewards strategies will be better equipped to face future disruptions and support business success.