This article by Steven Cox, Chief Evangelist at IRIS FMP, considers the issues around benefits and compensation that organisations must get on top of when assessing the future needs of their business and the workforce.
Benefits and compensation
Compensation and benefits are a key part of work in HR. When planning ahead for benefits to meet the changing needs of the workforce, a new way of thinking is required to respond to changes in the world of work and create resilience for the future.
De-centralising benefits and compensation
A survey of HR professionals and decision makers by Care.com found that “many companies are abandoning the “nice to have” benefits critical to a centralised (such as free lunches and commuter benefits) in favour of benefits that have greater impact on the way we work today and will continue to work tomorrow.”
While favour may have previously been held by office workers, this is no longer the case. Instead, organisations need to ensure that compensation is equal, but not identical, for their staff, regardless of their place of work.
Whether this involves paying out compensation for home internet usage and paying a commuter benefit to those travelling in, making compensation de-centralised ensures its resilience regardless of the working situation in the context of an evolving world of work.
What are the key issues to consider when de-centralising?
Focus on the individual need. If you have a multi-select compensation plan, where employees can select the benefits that they would like the most, this puts employees in power and means that they feel valued in their decisions around benefits.
Compensation must remove any location barriers. Rather than making compensation favourable for those who attend the office, ensure your offering flexible for any location. An office-based employee could have a fuel allowance and a remote worker could have an equally priced home amenities allowance, and a hybrid worker could have a healthy blend of both.
The de-centralisation of benefits plans means that companies can be more agile with their response to new employees, changing workplaces and changing situations. This agility is key the future of work and the future of compensation and benefits.
Creating agility in compensation
Agile compensation is a key part of guaranteeing the progression of careers, and confidence in future job positions for employees.
Deloitte research found that “Sixty-nine percent of organizations say the changing nature of compensation expectations and strategies is important or very important for their success over the next 12–18 months, but only 9 percent say they are very ready to address this trend.”
Agility needs to happen, but is the corporate world ready for this?
Start-ups often compensate on a case-by-case basis. While this works for a short period, once the company reaches a stage where growth has sped up faster than they can cope, the compensation will be unequal. This could be from a lack of equality in equity, to a difference in growth schemes.
However, this doesn’t just apply to start-ups. As companies move from five-day work weeks in offices to hybrid blend approaches after the pandemic, agile compensation is needed to ensure that each employee is paid in a de-centralised manner.
What are the key issues to consider for agile compensation?
Create a system that lets individual and company growth happen in parallel. As compensation is around 70% of a business’s outgoings, it’s important to ensure that the compensation is fair and scalable. You also don’t want to let the company grow but leave your team feeling disgruntled that their part in getting the company to grow isn’t rewarded.
Think about teams and middle managers in your compensation growth plan. Perhaps you don’t have any right now but as times change, team positions may change, and compensation should reflect that.
Allowing for variable workplaces and location. People may now be working from other countries, fully remote from a van, or you may have people back in the office.
On-demand pay. A growing trend in payroll has been that of on-demand pay where employees can get paid throughout the month as they earn their wage. According to the Workplace Institute at Kronos: ‘More than half of all employees believe that on-demand pay is a more attractive benefit than additional paid time off.’ This benefit is gaining popularity due to its flexibility for employees and companies alike. It can be a great way to build a symbiotic relationship with employees whilst allowing them to achieve financial control over things like childcare costs, unexpected bills, and loans.
Employee financial wellbeing
Finances are the most common source of stress for men and women. No one enjoys paying unexpected bills and loans and so giving your employees peace of mind through their financial wellbeing is key.
While financial wellbeing may be interpreted as simply being paid enough money to live, it actually encompasses all manner of finance solutions. This could include financial advice, short term or low-cost loans and even benefits such as travelcards or discounted memberships.
What are the key issues to consider for employee financial wellbeing?
Financial Capability suggest considering the following to prepare your business for a financial wellbeing programme:
Administration costs.
Opportunity costs of employee and management time to manage and deliver these interventions.
Direct personnel costs involved in additional activity required to design an effective strategy.
Proposed impact metrics to provide feedback on programme effectiveness, as well as cost benefit analysis.
Ultimately it is in the best interest of the company to be as flexible and supportive as possible as money-related stress can severely impact productivity and increase absenteeism. Exploring programmes such as on-demand pay may not incur any extra cost internally but could make a huge difference for employees and their wellbeing.
Applying this globally will also expose differences in the financial support needed to achieve good wellbeing, and tailoring support country by country will also need to be considered.
Global future of compensation
In international companies, this approach to agility and flexibility has implications if the requirements in some countries are different for offices based in different locations.
For example, minimum vacation days in the States are not required federally. Therefore, a company that is headquartered there, but has a branch in the UK, would need to ensure compensation is appropriate for each location, but equal in practice to ensure transferability.
Conclusion: benefits and compensation
It’s incredibly important to create a compensation and benefits strategy that can grow, scale, and reflect the changing nature of work.
Below are some key points to consider:
Approach your compensation with flexibility in mind. Something as individual as people’s payroll can’t be brushed with a one size fits all approach, and compensation needs to be able to mould to benefit each employee.
Make your benefits globally focused so you can scale at speed. Benefits can be selected by each employee, or by country. This change not only positively impacts global employees but those in hybrid or remote roles. Benefits such as care, travel, insurance and more can be applied both remotely and in office locations.
Survey employees to find out what they want from their benefits. Without this, you are walking blindly. Direction from your employees puts them in control and increases their positive perception of the company.
Steven Cox is a Technologist, Chartered Accountant and a regular columnist and contributor to leading business and HR publications.
This article was written in collaboration with IRIS HR, a leading international HR consultancy, specialising in the support of global HR and resourcing from large corporations through to entrepreneurial start-ups.