How to make sure your reward strategy hits the right note

Ask an HR person the size of their organization’s salary bill and they will have no trouble coming up with a figure. But what about the link between pay and performance? The impact that pay has on employee retention? Or, which benefits are most valued by staff?

Thanks to advances in technology, it’s easier than ever for organizations to collect the detailed data they need to make strategic decisions about compensation and benefits. But, research suggests that many companies are not yet exploiting this information. A CIPD survey found that only 19% of organizations were able to answer straightforward questions about the spread of pay between managerial and non-managerial staff.

So, what can HR do to help organizations develop reward strategies that meet both the needs of the business and of employees?

1. Join the dots

Decisions about rewards and benefits are often made separately from the overall business strategy. The key driver is how much the organization can afford, rather than what it might need to achieve its objectives.

If you haven’t refreshed the rewards strategy for a while, now might be the time to go back to the drawing board and think about the direction the business is heading, the results it needs, and the behaviors it wants to encourage. A reward strategy that reflects these key drivers is more likely to help the organization attract and retain the right people and support the performance improvements it needs.

2. Dig into the data

There’s been a lot of talk about “Big Data” – and in particular the HR profession’s tardiness in embracing it. A reward strategy is, however, one area where data is easily accessible and understandable. If combined with other people-related information, it can provide valuable insight.

The latest generation HR software systems are making information about performance, absence, retention and engagement readily available. Forward-looking companies are bringing these sources of information together with reward data and using them to get a real picture of what is driving productivity and motivation,  and how they can use rewards to keep hold of their most talented people.

3. Be flexible with benefits

The most effective reward strategies recognize that not all employees are the same. People value different benefits more or less at different ages and stages of their career. A Generation Y employee, for example, may value the chance to sacrifice some salary in exchange for extra vacation days. A Generation X employee with a young family may place a high-priority on child care support, while a Baby Boomer is likely to be more focused on their retirement fund.

The key is to talk to employees about the benefits they would find most useful and offer a carefully chosen range that people can opt in and out of as they progress through their careers.

4. Don’t fall behind the pack

Companies don’t have unlimited money to spend on salaries – but it is important to benchmark pay and benefits regularly to make sure what your offering is not seriously off kilter. Pay is far from being the only motivator, but talented people do need to feel that they are being fairly rewarded for their skills and experience if they are to stay.

Take a look at the market (both in your area and your sector) to get a sense of the ‘going rate’ for the job and the benefits that are commonly on offer, so you can make a conscious decision about where you want to sit on the playing field. Companies operating in an area of high skills shortages may need to pay a premium to attract the best people, while others may be able to occupy the middle ground based on their corporate brand or workplace culture.

5. Communicate the value

Organizations often fall into the trap of telling people about the great benefits package they are getting while onboarding and then never mention it again. People won’t value what they don’t understand or can’t remember. Regular communication is key to remind employees of what’s available, to encourage take-up and help them appreciate the overall value of their benefits.

Don’t forget to emphasize non-financial benefits too. Free hot coffee or fruit, the opportunity to work flexibly and a cracking Christmas party are often unsung benefits that in reality add a lot to the experience people have of working for the business.

 

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