How do compensation and benefits impact employee engagement and retention?

I strongly disagree that total rewards "retain talent by being competitive and fair". I've worked in the field for 20 years and I've never seen evidence for that. Instead I've seen people join a company (somewhat based on the package) and then it quickly becomes common place to them and other things (like manager, coworkers, and project work) are far more important for the rest of their career. (The only comp. that keeps people is golden handcuffs, and we don't want that.) Also, how do you define "fair" compensation. There are an infinite number of ways to cut market data or decide on the value a candidate; since it's so biased to individual practices it's become fully subjective and then we could never agree on what's "fair".

As a rewards practitioner for more than 17 years, I can say with conviction that compensation would rank lower down as a means of engagement and retention. The number 1 factor in many studies is the Manager, followed by Job content. Brand, colleagues etc. follow. At some point, compensation becomes a hygiene factor and a given. The usage of compensation as one of the levers to drive engagement can be with better and more open and transparent communication. In many instances, the perception of being paid unfairly and the mystery around it is what triggers employees sitting on the fence to jump ship. Timely, frequent and open recognition are more important engagement drivers than compensation.

Comp and benefits are hygiene factors. They have to be at a level where they aren't detractors but they aren't drivers of employee engagement. They are, however, used as levers when employee engagement is low and leadership wants to use them to try to retain people instead of doing the hard work to change the culture and improve the climate within the org. Comp increases are a fast action where there are retention issues, but they usually don't fix the root of the problem that's driving people away.

I have been in rewards for over 16 years, in-house and as a consultant. The answer is nuanced: - perception of fairness overall matters, brought about by transparency on reward processes; - base salary perceived to be fair and competitive; - individually meaningful quantum of variable pay (short or long) may matter to some; - recognition (feedback, public commendation, spot bonus) by peers and management matters to all, and certainly drives; - as far as the UK is concerned at least, a strong DC pension will also make most employees click; That’s where Rewards in general can have some semi-direct influence. What makes employees stay is such a complicated mix of overall culture, quality of line leadership, and growth. Rewards matter, a bit.

Non financial and non tangible rewards and opportunities are just as, if not more important, then financial incentives and rewards. If an employee cannot see a clear and achievable career path and is not supported in their growth no amount of market leading benefits could retain their services for a sustained period of time. Total Comp has grown to be so much more then just salary and monetary benefits.

In my experience, managing compensation and benefits isn't just a fiscal tightrope. It's a balancing act where employers must be equitable, competitive, and sustainable while juggling budgets and the complexity of a diverse workforce filled with unique values and goals influenced by varying dimensions of diversity like neurodiversity, age, gender, culture, and life stage, among others. The challenge isn't just about meeting and effectively communicating these demands to employees, ensuring they understand how their pay and benefits align with performance and career progression.

The more we can educate and empower our leaders to discuss compensation is every day discussions, the sooner we break down the stigma that it's something taboo. We all make money. We all make different amounts of money. Discussing the differentiators in compensation from an objective standpoint - ie 20 years of exp vs 5 years of exp or advanced cert vs intermediate cert - as well as aligning comp discussion with results as a differentiator helps to bring clarity to the employees.

There is definitely a fine balance, it is clear a wide approach of not all benefits fit all is true and therefore to truly offer a reward/compensation and benefit package that meets everyone's needs is quite challenging. Sometimes tiny steps in the right direction can lead to big actions I.e. Processes that give room for annual reviews etc, training opportunities

Transparency is of paramount importance. Rewarding high performers is key to organization success. A robust policy helps attract and retain beat talent.

Challenges in compensation and benefits may arise from budget constraints, market fluctuations, and diverse employee expectations. Striking the right balance becomes essential to meet both organizational and individual needs.

You should also consider the varying needs of a diverse workforce. It’s best practice to personalize—no two employees are alike, so why should their compensation be? Reflect performance, skills, and roles in rewards to fuel motivation. Understand that compensation isn't one-size-fits-all—what works for a Baby Boomer might not click with a Gen Z. Stay abreast with the market but remember, it's not always about keeping up with the Joneses. Sometimes, it's about creating your own league. Transparency is key, make sure employees understand their compensation—its composition, its link to their performance. Money talks, but meaningful conversation matters more.

When one gets down to designing the compensation plan, they must take a note that while it is important to understand compensation, benefits and total rewards practices in their industry, they need to dig deeper and understand what will work with their EVP and Talent Group. Just because another company has a cool looking incentive plan which works wonderfully, it does not guarantee any success with your own organization. In some cases, it may be counter productive as your own organization's DNA is very different

As a best practice, don't forget to benchmark your highly compensated employee benefits and compensation to that of your non-highly compensated employees. If you want employee engagement to reach top tiers across all levels, all employees need to feel that they are being considered.

Effective practices involve conducting regular market research to stay competitive, offering a comprehensive benefits package, and implementing transparent communication. Flexibility in compensation structures and recognizing individual contributions are also key best practices.

In my experience, compensation and benefits are important but vary significantly for different people. Taking extra steps to include employees' needs in comprehensive benefit plans cultivates a sense of psychological safety because it conveys that nothing is taboo, compensation included.

Compensation and benefits packages have an important part in driving engagement but it's not only salary & benefits that motivate people. Also, reward deals with perceptions, even people with highy competitive salaries can be unhappy about their remuneration. Traditionally, reward scores lowest in all engagement surveys.

Beyond financial rewards, a well-structured compensation and benefits program enhances employee morale, loyalty, and overall job satisfaction. It acts as a powerful tool to attract top talent and retain skilled professionals in a competitive job market.

Future steps should focus on continuous evaluation and adaptation of compensation strategies to align with industry trends and employee expectations. Embracing technology for better administration and personalizing benefits can further optimize employee satisfaction and retention.

In my experience, cultural values in compensation plans aren't just an afterthought—they're the backbone. Dive deep and consider how cultural nuances shape what employees value. A global team? Maybe emphasize flexible work schedules and cultural holidays. A younger demographic? They might appreciate a robust wellness package or student loan repayment assistance. It's about making benefits not just comprehensive but relevant. The right blend speaks volumes about understanding and respect for diverse cultural values. It sends a clear message: 'We don't just want you here. We want you to feel valued and at home.' It’s about creating a compensation plan and a culture of belonging.

Consider the evolving landscape of remote work, the importance of work-life balance, and the impact of cultural diversity on compensation preferences. Regularly solicit feedback from employees to refine compensation and benefits offerings for ongoing success.