To design benefits and rewards during a pandemic and recession, employers face two challenges: getting more value for the total cost of their programs and shifting benefits to meet people where they are now.
Rethinking spend can help companies provide competitive compensation and introduce newer perks that reward loyalty in today’s market. A third of workers say that targeted benefits would help them in this time of stress and anxiety, heightening the need for change.
Organizations that take the opportunity to respond can gain an edge: happier employees are associated with higher productivity.1 And analytics stemming from total rewards strategies can help predict productivity or provide early warnings when people are feeling strained.
Where can you start? Here are several actions to consider as you update rewards and benefits for a changing market.
1“Nice Work,” The Economist, August 3, 2019, accessed via Factiva, September 17, 2020.
Organizations that take the opportunity to respond can gain an edge: happier employees are associated with higher productivity.
Total rewards are more than fair pay, insurance benefits and time off. To many employees, total rewards are a big portion of the overall experience they have at work, including their career progression and development opportunities.
Start by looking at the many different aspects of benefits and rewards collectively — healthcare, flexibility, wellness, paid time off, retirement, compensation. Consider the different needs of your various employee cohorts. For example, parents with younger children planning to make major changes to their professional lives as a result of COVID-19 because they have no childcare.2 A single person right out of school, on the other hand, may be looking for opportunities to pay down student debt, a need that may be magnified by stagnant or reduced wages.
2Jessica Dickler, “21% of Parents Had to Reduce Work Hours Because of Remote School, Survey Finds,” NBC Bay Area, September 1, 2020, accessed via Factiva, September 24, 2020.
Textbook rental company Chegg pays its remote workers’ monthly internet bills and gives them $500 for home office furnishings
Companies that give employees more control over their benefits can have an edge over those that don’t. Instead of providing limited options, aim for more flexibility.
Some companies are matching employees’ student loan repayments with 401(k) contributions, for example, since many can’t afford to put the money aside themselves. Others are allowing employees to “sell back” unused vacation days and put that money toward their student loans.
Offering support for remote work and supporting families with flexibility when returning after parental leave, for example, can help differentiate your company.
J.P. Morgan is giving employees flexibility that didn’t exist before the pandemic with a rotational remote work model.
We believe information about employee needs should help guide how you approach changes to total rewards programs. Both health and economic hardships have shifted employee views on must-have benefits over the nice-to-haves. Employers are no longer adding perks like pet insurance and identity theft protection. Instead, they’re weighing compensation models, flexible work arrangements and well-being programs.
Newer, AI-tuned virtual focus groups can speed the process of identifying how to make tradeoffs while recognizing what different employee segments value. Use data models to predict possible outcomes for the changes you’re considering. Your analysis can check for potential negative effects of your choices on related measures such as employee satisfaction or retention.
Organizations with an employee engagement survey program have engagement levels 10% to 30% higher than those without surveys in place
Monitoring and managing benefits and budgets holistically can help you prioritize what to keep, cut or renegotiate. Start by reviewing existing contracts and checking options for unused benefits.
As you start mapping out where to make changes, you might find it difficult to understand how to optimize savings. To make the right tradeoffs, we recommend a multifaceted approach to analyzing costs and returns. To understand the effectiveness of your Employee Assistance Program, for instance, consider mental health medical and prescription costs as well as rates of employee absenteeism related to stress or other mental health issues.
Expect telehealth to settle in as a viable and desirable alternative to in-person care, saving employers on the cost of care delivery.
For most organizations, the financial health of the company will ultimately drive changes to total rewards. That’s why the CEO, CFO and CHRO should work together to guide the budget and strategy.
Keep employees informed and have leadership set the tone by communicating the overall employee value proposition. Help employees understand the strategy, and reinforce what they’re getting in return for the skills and experience they bring to the business.
Ask leaders to share their own experiences. When members of senior leadership share their own experiences, such as taking a pay cut or talking openly about mental health, it makes people feel comfortable using their benefits. Setting an example at the leadership level can help build a more inclusive company culture.
Benefits add value to your organization only if employees understand they exist and use them. Unfortunately, we’ve found many employees don’t even know what benefits are available to them. Some employees may simply need a reminder about certain benefits. Virtual gym subscriptions, for example, can be beneficial for stress reduction, but people won’t use them if they don’t know about them.
Technology tools should be intuitive and make it easy for employees to understand options, pick choices and make changes when necessary. Consider setting up a “hub” where your employees can see all of their benefits in one place — those selected and others that are offered — as well as the tools they can access to view and choose benefit options.
In response to the pandemic, CVS Health rolled out a childcare and eldercare benefit that gives employees up to 25 fully covered days of backup care.
What needs to change: Managing healthcare benefits for cost savings alone.
Why? Stress costs business money, to the tune of more than $300 billion annually.4 This is because stress taxes your employees’ mental and physical health, leading to anxiety, sleep deprivation and eventually absenteeism and turnover.
What to do instead:
1. Take a more a holistic approach to well-being
Research on the benefits of well-being shows promising links to individual, team and business outcomes.5 And with the added stress created from the current pandemic, societal and financial situations, a holistic approach to well-being can help keep your workforce engaged. Many employees value an approach that includes physical health (condition management, exercise), mental health, social health (volunteering, community service), financial wellness and career development. A total well-being approach puts these components under one “wellness” umbrella.
2. Bring in technology
Benefits companies are making it easier for people to keep tabs on their overall health through technology. Consumers and clinicians alike are embracing telehealth as a viable and desirable alternative to in-person care. By using telehealth, employees may be more likely to get the care they need and employers can save on health plan costs.
As gyms closed because of the pandemic, people quickly learned that they could take almost any workout class from home. More companies are now also offering access to mental health apps to help employees handle day-to-day stress. As an employer, be sure to check how wellness apps protect employee data. Communicate clearly how personal data will be used so that employees who want to use them understand any privacy considerations.
4Julia Hobsbawm, “Why Corporate Wellness Programs Fall Short,” strategy+business, September 28, 2018.
5PwC, “PwC’s Well-being Learning Project,” 2019.
What needs to change: Offering retirement planning by itself.
Why: The US Department of Education reports that Americans owe about $1.54 trillion in federal student loans, an average $36,000 per borrower.6 People have different financial priorities at different stages of their lives and need a broad range of financial support. It’s hard to think about saving for retirement when your family may be struggling with income loss as a result of the pandemic or you’re saddled with massive amounts of student loan debt.
What to do instead:
1. Focus on personal financial planning
Instead of focusing solely on retirement plan options, companies should think about overall financial wellness and support for financial planning. For example, the CARES Act makes it easier for workers to tap into their 401(k) plans and IRAs, but they may not be aware of this benefit or they may need help understanding the pros and cons in terms of overall financial health. Others may feel they can’t afford the minimum contributions for retirement savings, so they can’t find a path to start. Help employees look at their total financial picture — credit, debt, saving — and help them understand how to reach their goals. Use assessments and coaching to help employees take stock of where they are so they can map a path toward financial wellness at any point.
2. Consider offering student loan repayment help benefits
Helping employees pay off their student debt can be a big incentive to join or stay with a company. Only 8% of companies now offer student loan repayment benefits.7
6Josh Mitchell, “Lawmakers Split on Student-Debt Relief,” Wall Street Journal, July 27, 2020, accessed via Factiva, September 17, 2020.
7Alyssa Place, “Paid time off is most desired workplace benefit,” Employee Benefit Adviser, December 20, 2019, accessed via Factiva, September 17, 2020.
What needs to change: Lack of transparency around compensation.
Why: Employees are more engaged than ever in managing their careers, and they particularly want to know about the skills that will be best rewarded. Economic realities have led to wage loss for some, raising the need for security and reassurances about compensation. Expect employees in high-demand roles to be looking to the market for validation of both their current and potential future compensation.
What to do instead:
1. Build a clear narrative around what your company values
Employees are looking at data about compensation and promotion paths. They want to know how their employer will help them develop, how they will be reviewed for pay increases, whether they will have the mentoring support they need and what their career path options will be. Your company can get ahead by fostering a more supportive career management path for your employees. Be more transparent around pay. For example, consider disclosing current compensation bands as well as aspirational compensation bands. Set up point-of-recognition programs that allow managers to recognize employees in the moment. And outline the kinds of training and development programs employees can expect at different stages of their careers.
2. Rethink your approach to market comparisons
This includes a broader definition of compensation from benchmarking, job architecture, opportunity paths, and incentives and pay mix. Some companies are starting to tailor compensation for employee segments that will help differentiate their business. They’re basing pay levels on where top employees could go and what they could do rather than looking only at what they have already done. Others are exploring opportunities to transition from fixed compensation plans to variable plans. All companies should expect that traditional market and industry comparisons may no longer be appropriate due to a changing demand for skills. Be sure to include tax optimization in your plans to benefit both employees and the company.
Supporting great people in difficult times isn’t easy, and it’s not likely to change any time soon. HR leaders should do more than administer the programs they already have — they must work with senior leaders to help give every employee a great experience.