The world of work is evolving - and Total Reward needs to keep pace

In recent years, events including the COVID-19 pandemic, the war in Ukraine, rising inflation and economic uncertainty have set the scene for an intense power play between employers and employees. With outcomes ranging from the great resignation to the ‘quiet quitting’ phenomenon, it’s clear that? today’s future-fit employers are those that can anticipate and quickly adapt to the fast-changing landscape.?

What’s more, change is continuing. Over the past year or two, we’ve talked about employees holding the balance of power .? But now we can expect the pendulum to swing back to a more neutral position. It’s a shift that will see the psychological contract rewritten, as we move away from an employer-employee relationship that’s largely transactional towards one that’s more relational.? .One that’s characterised by mutual commitment and a willingness for each party to consider the interests and preferences of the other.?

The implications of this change are profound. One of the biggest? As the employer-employee relationship evolves, so should an organisation's approach to Total Reward.

Employees’ expectations have increased…

The need for a new approach springs from rising employee expectations. As inflationary pressures have continued to play out across the world, employees’ demands for more competitive compensation packages have become more pressing. Companies have risen to the challenge, with 62% increasing compensation and an additional 22% considering doing it.

Some organisations have gone a step further - by offering more incentives and benefits to attract and retain talent. Approaches include offering hybrid work options for employees; increasing career advancement and upskilling opportunities; making remote work a permanent option for certain roles; improving employee wellbeing in areas like mental health and childcare; changing processes to address labour shortages; and even - in some cases - allowing employees to permanently relocate outside of a core office location. All in an effort to secure and retain highly sought-after talent and skills.

…while their preferences have also shifted in relative importance

However, the results have often fallen short of expectations. So, despite offering more benefits and incentives, why are organisations still finding it difficult to attract, engage and retain top talent? Our research shows that alongside their generally rising expectations, employees’ preferences have also shifted. For instance, the relative importance of financial compensation has actually declined by 24% over the past decade. Meanwhile, the importance of other types of benefits - the likes of medical, dental, vision and life insurance, supplemental health benefits and childcare - has doubled. Even more dramatically, work-life options and training and career development have tripled in importance.

It all starts with listening to employees

In light of such profound changes in what their people want, what should organisations do? Those that actively and consistently listen to their people stand the best chance of understanding and fulfilling employee preferences. This is, firstly, because the very act of listening demonstrates care. And secondly, because listening enhances understanding and spurs action.

By listening to individual employees, employers can come to understand that employees don’t necessarily want more benefits, but rather what we call Total Wellness - defined as “A state in which an individual has optimal physical, emotional, mental, social, career and financial wellness”. And employees want Total Wellness not only as a way to enhance their lives, but also to realise their full productivity potential and deliver sustained outcomes at work. Importantly, Total Wellness comes with significant workforce, business and societal benefits as well.

The importance that employees attach to their Total Wellness is deeply entrenched in their preferences, as shown by our research over recent years. Here are just a few examples:

• Physical Wellness - The importance of healthcare benefits has doubled more-so post Covid-19.
• Emotional Wellness - Working with good co-workers ranked 1st in one of our surveys.
• Mental Wellness - Our latest Global CEO Survey found that 61% of CEOs are worried about the declining wellbeing (more so mental health) of their people.
• Social Wellness - 60% of survey respondents cited ‘my team cares for my wellbeing’ as an important factor when considering a job change.
• Career Wellness - When asked the top reason for looking for a new job, 69% of respondents cited wanting a fulfilling job.
• Financial Wellness - Being fairly rewarded financially for work ranked first, with 71% of the respondents citing financial reward as an important factor when considering a change in work environment.?

Positive outcomes across the workforce - and beyond

The message is clear. Organisations that really care about their employees will rethink Total Reward so that it delivers Total Wellness for their people. This way, employers can take the lead in rewriting the psychological contract, and truly make the move away from a transactional to a more relational employer-employee relationship.

And the best thing? Taking this step not only enhances Total Wellness. It also results in tangible people, business and societal outcomes. These include enhanced employee productivity and performance; higher levels of customer satisfaction; and enhanced organisational brand and reputation in society, to name but a few.?

Even given today’s gloomy outlook for global economic growth, rethinking Total Reward to deliver Total Wellness will prove to be a vital tool for employers to ensure their employees are well-supported and motivated even in the face of budgetary constraints. And by adopting this approach at a strategic level, organisations can also optimise and improve the return on their total reward spend - while gaining a significant competitive advantage in the intensifying battle to attract and retain talent.?

The big takeaway? When it comes to winning and keeping vital skills, don’t just think of pay and hybrid working. Think Total Reward - as a route to Total Wellness. Your employees will appreciate you for it.