Planning rewards for an uncertain future 

How smart rewards teams are taking the opportunity to put their house in order.

Take a deep breath. You need it. For the past few years, rewards teams like yours have been trapped in a whirlwind that has barely given them room to think, much less plan.

We’ve almost become used to the rolling disruptions of the pandemic, high inflation and talent shortages and in many cases our carefully developed total rewards strategies have fallen by the wayside. The mad dash to get people into seats have left rewards teams scrambling to square skills and scarcity with roles and pay, with mixed results.

Now, according to the latest reports, the job market has finally cooled from an unsustainable boil to a more stable simmer and has provided a much-needed breather for rewards teams. At last, we’re seeing more stable attrition rates and less pressure on salary increases — finally giving rewards teams a breather to assess where we are and reflect on the evolution of pay and rewards since spring of 2020.

While the current stability in the job market offers a welcome respite, it’s essential to remain vigilant and proactive. The landscape of work is evolving rapidly, influenced by advancements in technology, including AI, as well as ongoing political and economic changes. Rather than viewing these developments as threats, we can see them as opportunities to innovate and enhance our rewards strategies. By focusing on building resilience and adaptability now, rewards teams can position themselves to navigate future challenges with confidence.

So yes, the maelstrom will strike again, it's just a matter of when and how. The real question is, how do you prepare? What can you do during this period of relative calm to improve your organization’s ability to navigate the future storm of uncertainty successfully?

In fact, this break is a prime opportunity for HR and rewards teams to regroup and strengthen their fundamentals to prepare for whatever comes next. Here are the key strategies you can use to put your house in order and build resilience against future uncertainties.

Building for resilience

Take this time to build: Establishing solid foundations for pay and rewards now will enable quicker, more resilient responses to changes in the market or regulatory environment in the future. This may be your last chance to fortify defenses and eliminate risk areas before the storm hits. When that disruption inevitably arrives, those who have invested in strong, adaptable systems will navigate the turmoil more confidently. 

You’ll also be much better positioned to share pay and rewards data according to pay transparency regulations having cleared up or set plans in motion to address your most glaring problems and inequities. To get started, you can find more detail on these regulations in our recent guide to Global Pay Transparency: Paving the Path to Equity: A Guide for Pay Transparency Readiness in the EU and Beyond,  which also lays out a three-step process for navigating pay transparency.

Focus on your rewards infrastructure: Updating technology, processes and data to align with business goals. This sort of foundational preparation will ensure you’re collecting the right data and are ready to leverage AI and other new technology tools most effectively. By modernizing and streamlining fundamental systems you’ll be better equipped to handle the unexpected and maintain a competitive edge.

Three steps for getting rewards in order

  1. Revisit the basics — Your infrastructure

    Begin by getting your bearings and understanding exactly where you SHOULD be on rewards and pay infrastructure. Good data collection and strong analytics will help you when forecasting trends and making informed decisions. This means a comprehensive inventory of all your systems, taxonomies and processes related to pay and rewards.

    Elements to consider include:

    • Job descriptions: Ensure all job descriptions are standardized, equitable, complete and up to date to reflect the actual roles in your organization with the skills and competencies needed to perform them successfully.
    • Job levels: Make sure all roles are properly allocated to the appropriate category of job level and pay.
    • Pay and salary ranges: Be sure all pay and salary ranges are correct and up to date.
    • Employee data: Ensure you can access accurate and timely employee data. This will be a fundamental building block for all other data assessment.
    • Skills taxonomy: Investing in skills development is a critical puzzle piece in determining pay and rewards. Be sure you have the technology in place and have done the work to build and support a robust skills architecture.
    • Pay transparency: Ensure you understand and can access all the data you will soon be called upon to share as part of pay transparency regulations in your region

    Perhaps most importantly, this step involves understanding your total rewards goals. Take the time to ensure that your pay philosophy is up to date and to understand where you have gaps between your pay strategy and actual pay practices.

    If your total rewards objectives are lacking or out of date, take the time now to build (or rebuild) them out at a high level and gain buy in —  defining or reconfirming your philosophy and aligning it with your organization’s short, medium and long-term business goals.

  2. Leverage your data to assess your strengths and weaknesses

    Once you’ve established the ideal infrastructure, taxonomies and processes needed to execute on your goals, it’s time to see where you are against your strategy. That means audits and assessments, so you can know where you are strong or weak. Begin by auditing your employee data to be sure all data is correct and up to date, then look at patterns of how people are compensated within your organization and audit for fairness, industry benchmarks and value to your company.

    This includes a comprehensive analysis of employee-level data including:

    • Demographics (age, tenure, gender, ethnicity, and so forth)
    • Base salaries
    • Bonus distribution
    • Alignment to performance
    • Alignment to promotion
    • Turnover rates

    Include collection and analysis of employee feedback in the mix, to understand how your employees see rewards and their overall employee experience. You will also want to invest in data visualization tools to make sense of complex data sets. Enlist the help of experts like Mercer to build out your internal labor market, evaluate your total rewards practices and benchmark against the market and internal compensation goals and objectives. 

    An important part of this step will also be calibrating and identifying bias within the system. As you look at your data through the lens of diversity (and markers such as gender, ethnicity, location and so forth) you will identify outliers. Understanding who is over or underpaid and why will help you identify issues that need fixing.

    This analysis should include:

    • Unexplainable pay gaps — How many are there? Are there patterns or clusters?
    • Magnitude of the problems — How big an issue is it? How much will it cost to fix?
    • Key drivers and root causes to be addressed — How do you prevent this from recurring in the future?
  3. Create a roadmap to success — Your strategy

    Now, you can begin to fix the problems you identified during your audit and build out short-, medium-, and long-term strategies to close gaps and execute on your goals.

    This step can often feel overwhelming, so it’s important to remember you won’t change everything overnight. Divide the roadmap into attainable segments. Trying to do everything on your list may result in getting nothing accomplished at all. Organizations can typically only tolerate finite levels of change when it comes to compensation and benefits, in a given period.  Pay, especially, can often take several cycles before you begin to see significant progress on equity — so be sure to prioritize and promise realistically.

    Here are four tips for executing on this strategy:

    • Clean up the messes you can clean up immediately: Look for low hanging fruit and gaps that you can easily address first. 
    • Continue to execute on your medium- and long-term strategies: Create sustainable processes for long term remediation of issues. Even if you can’t solve something immediately, being able to show incremental progress will be important for addressing pay transparency and reporting.
    • Anticipate and build-in flexibility: Economic downturns or unexpected events will happen. Create a sustainable mechanism to regularly review and update policies to align with current and evolving business needs.
    • Use technology wisely: You don’t need to start from scratch. Any problems you identify are being felt by other companies and it’s likely there are solutions out there that can help you to move more quickly in solving them. Talk to experts for advice on what technology can help you to move more quickly.

    Finally, be sure to measure and manage as you go. It won’t be long before things will get loud and bumpy again but if you’re doing the work now to create a ‘North Star’ in your strategy, measuring and managing against it will be critical in helping you to stay focused and successful.

Next steps for pay transparency

It’s natural to feel a little battered by the past few years but it’s also critical to learn from them. We’ve been given the gift of a little calm before we collectively leap into the new age of AI and the work we do now will pay off once things begin to heat up again. 

Our research report on Global Pay Transparency, derived from a comprehensive global survey, lays out many of the benefits companies are seeing from getting out ahead of compliance on pay transparency in every region and provide some benchmarks to help make the case for tackling this critical issue. 

But no one needs to do it alone. Reach out to our experts on the Mercer team to learn how we can help you build critical infrastructure and strategy to support the evolution for your total rewards strategy and prepare for pay transparency. We’d love to talk about what you’re hoping to accomplish and help to build a plan to get there. Contact us, today.

About the author(s)
Gordon Frost

is Global Rewards Solution Leader at Mercer

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