What is the outlook for the reward landscape, and how are employee expectations changing?
If anything, the past two years has taught us to expect anything but what we once knew to be ‘the norm’, and the reward landscape is no exception. We once understood what employees wanted, but recent health, political and economic emergencies have triggered a dramatic shift in desired reward offerings, forcing businesses to rebuild people strategies to better suit new ways of working and suppress the effects of the great resignation, spiking inflation, and an impending recession.
The great resignation: talent attraction and retention
Josh Bersin, Founder of Bersin by Deloitte, suggested, over a decade ago, that “The War for Talent is over. The talent won”. This, perhaps, resonates more today than it ever has – the current labour market is tight, and skilled professionals have the power to determine where they work. Research conducted by Korn Ferry suggests that there will be a shortage of over two million skilled workers in the United Kingdom by 2030; the Chartered Institute of Personnel and Development (CIPD) also predict that there will be more jobs than people by 2030. Whether we like it or not, employees currently have the upper hand.
Recruitment is difficult right now, with most businesses reporting significant problems filling vacancies, and there are some areas of high demand, for example: financial services, technology, and recruitment, and we are certainly witnessing this with a high number of live interim and permanent recruitment vacancies. With over 38% of employees considering resigning or changing professions this year, it is essential that businesses have an attractive reward proposition to help them stand out, and to attract, motivate and retain the best candidates.
Gone are the days where a standardized reward package is sufficient – employees are eager to see a continuously delivered and flexible reward program that is aligned with their needs and based on individual contribution; employees are seeking a reward offering that allows them to select their benefits based on their stage of life. Employers may once have sought to attract talent based on a person specification and organizational fit, but that is no longer enough – employers need to understand what employees want from them and compensation is not always the only factor. A reward strategy built on a foundation of flexibility, strong career prospects and an understanding of both intrinsic and extrinsic needs is more likely to create an effective reward offering and an attractive employer brand.
COVID-19 upends the employment relationship and changes the world of work
In 2020, the COVID-19 pandemic came along and upended the employment relationship. Lockdown hit and employees went to work from home with variable levels of support; some were happy with the support provided and it helped cement the employment relationship, but for others, it started to fracture it. Cost reduction measures were commonplace throughout the pandemic, which, coupled with the support offered, have left a lasting impression on employees, causing them to reevaluate what they want from an employer.
The biggest reward lesson the global health pandemic has taught us is that being confined to an office is no longer necessary, nor is it always what individuals are looking for, with 46% of employees valuing flexible working arrangements most of all. COVID-19 turned ‘office working’ on its head and now over three quarters of employers offer regular homeworking to employees. The CIPD predict that, over time, 25% of working days will transfer to homeworking, giving employees the chance to adopt a hybrid approach to their working week, meaning a portion of it will be spent in the office and the remainder at home. Whilst some employers have embraced hybrid working through a mix of formal and informal arrangements, others are reluctant to alter their working practices, potentially, making their employment proposition less attractive in today’s world of work where flexibility is key.
Whilst there is no ‘one size fits all’ approach to implement hybrid working, employers should: agree an overall strategic position and be clear about what is on offer, provide training to support the management of remote teams, develop communication and engagement strategies, and encourage team cohesion in a virtual environment. Although a hybrid working model can help employers attract and retain talent in the post-COVID-19 world, their approach must be refined and embedded into the organisation and workforce for it to be effective.
Diversity, Equity, and Inclusion
Pay equity and, in particular, gender pay equity, has picked up pace in recent years, especially given a mandatory requirement for employers in the UK to report their gender pay gap on an annual basis if their headcount is 250 or more. We are deep in the realms of a talent-led market, and expectations are rapidly changing, insofar that gender pay equity is becoming an area of focus – individuals want to see that a prospective employer has an equitable and procedurally fair compensation philosophy and, where appropriate, understand what steps are being taken to address gender pay gaps. Furthermore, prospective employees are researching websites such as, Glassdoor, to understand a company’s culture and to determine if they are likely to receive a reward package that is competitive to the market.
Gender Pay Gap reporting and pay equity may once have been seen as superficial platitudes, but it is now a key factor that prospective employees will consider when choosing where to work. Employers must ensure they have a robust framework in place for managing pay equity in their business, and remedy pay equity across groups, if issues exist.
Inflation at the Highest Level in Decades
A concept that is hard to avoid is inflation – it’s all over the news and it’s impacting each and every one of us on a daily basis. In the year to June 2022, UK inflation rose to a 40-year high of 9.4%, and whilst it is forecasted to drop by the end of the year, employees are feeling the pinch now – they are struggling to feed their families and heat their homes.
In a study conducted by AON earlier this year, it was determined that salaries were projected to change by 2.3% in 2022; a recent Korn Ferry pulse survey forecasted that salaries would increase by 3% in 2022. These statistics suggest that salary forecasts are lagging behind inflation; however, the reported salary budgets may not yet account for inflation as they will likely have been completed last year. Although annual salary increases appear to be below inflation, many employers are taking additional steps to address the cost-of-living crisis by offering ‘across the board’ increases, retention payments and energy bonuses. Conversely, some businesses are adopting a ‘wait and see’ approach over fears of a recession.
Whether it be reviewing salary budgets, offering additional payments, or providing financial wellbeing resources, there are many ways in which businesses can support their employees as UK inflation reaches a historically high level; however, this must be done fairly and within appropriate budgetary controls that allow businesses to remain profitable and, subsequently, protect its longevity in the marketplace.
It’s clear that the great resignation, our emergence from COVID-19, a greater focus on pay equity and historically high inflation, has thrown everything in the reward landscape up in the air and that the ingredients of a successful reward proposition has changed. Reward can no longer be looked at in silo, instead, it must be considered in conjunction with other elements of HR to help build a holistic, well-rounded proposition that aligns with a changing and dynamic workforce that has increasingly diverse needs.
So, what can you do now? Of course, you can reach us, and we would be delighted to support you and your business, but here’s a few tips in the meantime: