A robust total rewards strategy is not only key to engaging and retaining the existing talent but is essential for attracting top talent as well. However, most organizations are still dependent on spreadsheets and manual processes – which is not only cumbersome but also less than effective. Read this article to find out why organizations need to adopt a tech-first approach to planning a total rewards strategy.
Did you know that 7 out of 10 organizations have increased benefits expenditure as a result of the pandemic, according to a report by Mercer? According to the same report, 85% of benefits and reward professionals have reiterated that their role has grown in importance. Technology emerged as their most significant partner as the C-suites and HR teams worked together to develop a comprehensive total rewards package during these difficult times. In this article, you’ll learn how technology is helping organizations navigate the post-pandemic world in the face of constantly evolving economic realities and employee expectations.
What Is Total Rewards Strategy?
A total rewards strategy is a comprehensive approach to employee compensation that encompasses all the benefits, incentives, and other rewards offered by an organization in exchange for its employees' skills, knowledge, and performance. It is a coordinated effort to develop a motivated and engaged workforce committed to achieving the company's goals.
The total rewards strategy goes beyond traditional compensation methods, such as salary and bonuses. It includes other forms of recognition and appreciation, such as flexible work arrangements, personal growth opportunities, health and wellness programs, and work-life balance initiatives. At the heart of it, the total rewards strategy aims to create a positive work environment where employees feel valued, supported, and motivated to give their best effort.
The Benefits of a Comprehensive Total Rewards Strategy
Every employee enjoys a reward and some recognition from their employer, for the work they put in. A Gallup study showed that employees who have received recognition or praise for their excellent work have shown a 9% improvement in productivity and a 22% decrease in absenteeism. Here are a few more reasons why your organization needs an effective total rewards strategy:
1. Attract the Best Talent
With the talent war intensifying over the years and with rising employee expectations, companies are struggling with talent acquisition. One of the ways for organizations to win this war is by offering a better total rewards package that goes beyond monetary compensation. A report by HR Daily Advisor showed that 55% of employees would be more likely to accept a job offer with lower compensation but a more robust benefits package. A well-rounded total rewards strategy that meets the diverse needs of employees can go a long way in attracting the best talent quickly and help the organization build a more diverse workforce.
2. Tackle Employee Retention
Retaining talent is one of the most pressing concerns for HR leaders across industries. Studies such as one by Gallup have established a direct link between the lack of recognition and employee turnover. The study showed that employees who do not feel adequately recognized are 2x more likely to quit their current roles.
3. Drive Up Employee Engagement
A survey by Aon Hewitt titled Inside the Employee Mindset revealed that 60% of the engaged employees believed their organization’s total rewards were above and beyond what other employers offered. According to an article published in Gallup, employees are 5x more likely to be connected to the company culture and 4x more likely to be engaged when employee recognition programs are on point. It has also been seen that the highly engaged teams led to 21% greater profitability.
Challenges in Crafting an Effective Total Rewards Strategy
Developing an effective total rewards strategy is not without its difficulties. One of the primary challenges for leaders is finding a way to establish a rewards plan that can entice and maintain a skilled workforce while aligning with the company's overall objectives and goals. Here are four of the most common challenges that HR professionals face when creating and implementing a total rewards strategy:
1. Complex Reward Structures
The modern total rewards structure is complex. On one hand, you have monetary rewards like fixed pay, variable pay, equity-based compensation, and performance-based bonuses, including short-term and long-term incentives. However, total rewards also include non-monetary rewards like perks, benefits, vacation time, work-life balance, etc. Managing these structures manually is difficult and may be counterproductive, leading to non-compliance and lack of accuracy.
2. Time-Consuming and Cumbersome
Most organizations rely on spreadsheets and manual work for their total rewards strategy. This is time-consuming and makes the entire exercise prone to errors, particularly in larger organizations with numerous employees. However, end-to-end HCM suites like Darwinbox are solving this with their offerings like Compport, a one-stop, integrated SaaS solution which promises to increase your rewards team efficiency by 90%.
3. Ensuring Compliance with Local Laws
Labor laws and regulations vary across geographies and can be complex. And these are constantly being revised by the local bodies. But organizations need to be on top of these regulations, and nowing and complying with the local rules is necessary for organizations operating in that geography. This requires careful evaluation, as non-conformity may lead to legal and financial penalties.
4. Keeping Up With Evolving Employee Expectations
As many organizations have discovered, employee expectations are continuously evolving when it comes to total rewards. For example, employees today prefer a personalized benefits package that includes remote work, mental health, well-being, flexible working arrangements, etc. The HR department must stay on top of these evolving trends if they want to attract the best talent.
The Evolving Role of Technology in Total Rewards
Over the last few years, the pandemic forced organizations to reinvent their entire total rewards strategy. As enforced lockdowns lead to isolation, uncertainty and anxiety, the HR professionals were forced to reimagine their approach total reward almost overnight. An additional challenge facing the HR team was delivering the benefits to the employees who were now physically disconnected from the organization itself. This is when HR and benefits teams turned towards technology. As a matter of fact, 76% organizations spent more on HR technology during the pandemic according to a report by Mercer. Here are some ways HR technology is shaping the total rewards landscape.
Personalizing Employee Benefits
Traditionally organizations have been offering a standardized rewards package for all their employees. However, the pandemic showed us that the one-size-fits-all approach won’t work in the post-pandemic world. As HR functions went digital, technology opened the avenue for reporting and analytics of employee data. This enabled HR teams to democratize total rewards. For instance, with the help of HR technology, employees can now choose whether to forgo their leaves instead of a bigger car allowance or opt for larger medical insurance. People analytics can offer HR leaders a peek into the employees’ true motivation and frustrations. For example, data such as past pay, promotions, correlation with turnover, etc. can help organizations study and evolve their total rewards strategy. For example, some organizations found that while a good salary reduced the likelihood of turnover by 3%, promotion was linked to a 12% higher chance of turnover. This was because the promoted employees had additional responsibilities but lacked sufficient training to handle the increased expectations effectively. However, organizations can counter this quite easily by including tailor-made employee training programs as a part of the total rewards package. At the same time, robust data management also helps ensure compliance and provides employees transparency and visibility on their choices.
Making Rewards Accessible
One of the biggest advantages of HR going digital was the simplification and standardization of processes. With the help of HRMS software, HR teams are now designing processes with the end user in mind. Modern solutions also come equipped with employee self-service capabilities. This allows employees to view their compensation information and change their personal information as required. Modern HR technology has also made instant or timely recognition a reality. It has enabled organizations to adopt continuous programs crucial for driving a culture of recognition. HCM suites like Darwinbox have the added advantage of being mobile native. This has improved accessibility further by empowering employees to recognize and reward their colleagues using the same mobile app they use for every other HR operation. Similarly, organizational social networks like Vibe bring social gratification into the mix.
Proactive Benefits Management Using Advanced Analytics
With HR functions adopting technology at a huge scale, organizations now have an ocean of metadata that is ripe for analysis. Modern software solutions with robust reporting and analytics capabilities have enabled HR professionals to study choice patterns and evolve a sharper understanding of employee needs. Feedback mechanisms enable HR professionals to understand what works well and what is not in real-time. This data-based approach has enabled organizations to truly start putting employees at the center of their benefits program.
Choosing The Right Platform For Your Business: Darwinbox x Compport
As businesses begin to realize the potential of HR technology in revolutionizing total rewards, the number of software providers have grown exponentially. On one hand, you have single point solutions that are designed specifically for total rewards. On the other hand, there are full-stack HCM suites like Darwinbox which offer a total rewards module like Compport. In such a scenario, it can be a bit confusing to zero down to the right platform.
While point solutions may seem to be relatively more cost-effective, it does complicate the overall operations splitting the data between multiple systems, databases and vendors. The maintenance of these points solutions also act as an additional burden on the IT team.
On the other hand, with a full-stack solution like Darwinbox, businesses receive an integrated and consistent end-to-end experience and a 360-degree view of the employees, lower operational costs, etc. Most important is the availability of employee data on one platform without any external interference. As such, we have the perfect solution in Darwinbox – the all-in-one HCM suite preferred by over 750 enterprises across more than 100 countries.
Darwinbox has extended the talent management capability by adding a layer of total rewards managed by Compport - an integrated SaaS solution that can manage all your compensation plans. Adding Compport to the portfolio has helped Darwinbox strengthen its Compensation Modelling and Sales Incentive Planning capabilities to empower users with more equitable, powerful, and intelligent compensation programs. From automating all compensation elements, including salary increments, bonuses, sales incentives and long-term incentives, Darwinbox now provides you with an end-to-end compensation management suite, efficiently resulting in higher employee engagement, productivity, and revenue.
With best-in-class security and compliance functionalities, a consumer-grade user experience, and extraordinary efficiency, Compport’s integration with Darwinbox enables competitive, fair, and equitable pay practices. This also helps with talent retention by enhancing trust and satisfaction among employees. It is a single source of truth for employees with comprehensively transparent, trustable, and actionable data. It also allows employees to share expectations and feedback on reward strategies, making rewards a two-way street. Darwinbox clients like Yes Bank, TVS, and SBI General have implemented the Compensation module via Compport to deliver a seamless rewards experience for employees.