Reward predictions for 2021
Ruth Thomas, January 06, 2021
Last year I kicked off my 2020 Reward Predictions for HR magazine by questioning why compensation practices were not adapting at the same pace as our businesses were evolving.
Clearly, I did not foresee a disruptive global pandemic that forced the need for change in what has been a transformative year. But, in fact, three of the reward themes I am predicting HR leaders will consider this year remain unchanged.
The economic, societal and health impacts of the COVID-19 crisis have brought greater clarity on how these three points might now take shape – and at a faster rate than predicted.
A move to more personalised pay
During the pandemic businesses became more people centered. We had to rethink the employee experience in ways that respected individual differences – including home lives, caring responsibilities, skills, mindsets and personal characteristics.
This contradicted the pre-crisis approach where most HR and reward policies treated employees as a relatively homogeneous body. Now managing transitioning workforces is common place with many restructuring reward in response.
This includes a broader reward offering with more options around wellbeing benefits to suit individual circumstances. Others, like HubSpot, are defining new hybrid roles with correspondingly tailored compensation packages. Now is the time to rethink the employee experience in ways that respect individual differences.
Listen to your employees and what they value and work to incorporate options in reward that reflect individual lifestyle choices and reflect hybrid workforce options.
Which direction for geographical-based pay differences?
For those companies committing to maintaining to remote work for the longer term (such as Microsoft, Twitter, Facebook and Square) reviewing how to manage geographical pay differences is on the agenda.
Do you adjust an employees pay because they are working remotely from a low-cost location compared with their high-cost office location?
Facebook took an early lead by announcing in May that staff salaries could be adjusted to align with the cost of living in their chosen remote-work location.
Others are taking a more considered approach with predictions that pay will gravitate to national averages when geography no longer becomes an element.
Remote-first companies like HelpScout were ahead of the curve here, already asserting geography plays no role whatsoever in determining the intrinsic value of the work. It is an interesting ethical debate that will play out over 2021.
Even before the current crisis, changing technologies and new ways of working were disrupting jobs and the skills employees need to do them.
Skills were becoming the new currency in the market for talent and paying for skills or skill acquisition rather than jobs was already a reward debate in play. Then, as workplaces transformed at pace, the need for rapid skills acquisition hit home.
This has accelerated the need to create a talent marketplace to improve internal talent mobility and create a skills ontology to identify skill gaps in the workforce.
Technology-enabled platforms are emerging, typically powered by AI, to address talent gaps and surpluses and empowering employees to connect the skills and interests they have to the right opportunities.
A better understanding of skills and how they create value in your organisation will help to pave the way to skills-based pay.
Fair and transparent pay
During the crisis many organisations created a level of transparency and trust among the workforce that hadn’t been widely apparent before. We spent time explaining why we had to make changes that impacted our employees.
A great example of this was the number of employees who willingly accepted pay cuts – something that was unthinkable before. It’s important to build on this spirit of trust and affiliation now.
But while COVID-19 was a great leveller in many respects it also highlighted inequalities that sit at the heart of our societies and workplaces.
The impact of pandemic on low-income and minority workers is now apparent. This does not sit well with the move to consider broader environmental, social and governance (ESG) concerns with companies redefining their purpose to generate a positive impact on society.
This was demonstrated in a statement issued in June last year by the US Business Roundtable (a group of nearly 200 chief executives, including the leaders of Apple, Pepsi and Walmart) and also by Deloitte who introduced the concept of the Social Enterprise in their 2018 Human Capital Trends.
With this conversation happening at board level now is the time to review wage equality between employee groups, undertake a proactive pay equity audit and build on the trust and affiliation earned during the crisis with transparency.
In 2020 change was forced on us. Now in 2021 we need to respond and review legacy compensation programmes as most were created for a different type of organisation and workforce.
Many businesses have seen their priorities and goals change and, as any successful reward strategy should be inextricably linked to business priorities, it’s inevitable we need to adapt whilst framing this in the broader ESG context and the challenges this brings.
Ruth Thomas is industry principal and co-founder at Curo