New year, new you, new…compensation? Many organizations are rethinking total rewards in response to a tightening labor market, and the concept is leaning more toward the true meaning of "total" when it comes to attracting and retaining employees.
It is inevitable that money will always matter to employees, but companies need to consider all the components of the Employee Value Proposition, and not just the compensation portion.
"There is a focus on non-financial rewards," which don’t require as much employer spending and offer a value that exceeds the cost, according to Tom McMullen, Korn Ferry Hay Group’s North American Total Rewards Expertise Leader. "Organizations are looking more creatively than ever before to maximize potential rewards while holding the line on future expenses," he told Bloomberg BNA.
Employees stay or leave for many reasons, and compensation remains a prominent factor, according to Evren Esen, director, Workforce Analytics at the Society for Human Resource Management. Research from SHRM found that job satisfaction hinges most on compensation, followed by benefits, with career advancement in third, Esen told Bloomberg BNA.
People also desire a decent work environment; another survey from SHRM found that the top three things that workers want in a job are compensation, benefits and the respectful treatment of employees. Broken out by generation, millennials actually ranked respect before compensation, according to Esen.
Employees want a human workplace, Esen said. "The main emphasis is putting the human back into things—that need for connection that employees have. Companies should foster that so their employees feel that they are part of something, and are not just a cog," she said.
Add an Educational Component
Pay alone does not always hold on to employees, nor does it necessarily make them happier, which is why some organizations are expanding packages to include education and the ever-desirable career path and training.
Changes introduced last year by Wal-Mart included a boost in hourly wages, but the retail giant also launched a new workforce development program that would go across all retail and frontline workers.
"In the past, we have not seen companies ‘upskill’ in training," Wal-Mart Senior Vice President of Talent & Organizational Effectiveness David Scott told Bloomberg BNA. Upskilling can lead to greater understanding and more potential for future advancement, he said.
The new training and development program—which covers basic retail skills, offers insight into the business side of retail, and also provides leadership skills—can set employees on a career path that has the potential to make a "big difference" to them, according to Scott. "If you just measure the compensation, it’s not going to change the actual environment. What causes real change is motivation and engagement," he said.
Taco Bell also introduced a new program after realizing that raising pay did little to slow turnover, according to Vice President of People and Experience Bjorn Erland. Called "Start with Us, Stay with Us," the program includes an educational component that encourages employees to finish high school, obtain their GED, or continue their education through online Excelsior College.
With the added education and training they receive through the program, employees gain greater opportunity to be promoted, which can boost their salaries, Erland told Bloomberg BNA. Even if employees leave the company, they remain "brand ambassadors," he said.
Rewarding employees isn’t just about salaries and bonuses; companies need to think about the entire package, according to McMullen of Korn Ferry Hay Group. This would include base salary, variable pay, benefits, career paths, work policies, the work environment and more. "It has been going in that direction for years," he said.
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