A farmer expects the harvest for what he sows. Except for in cases of unforeseen issues, the harvest does not disappoint either. There is an age-old HR saying, “if you pay peanuts, expect to get monkeys”. It has become increasingly important to match compensation with employees’ contribution. In formulating an effective compensation and benefits program, organisations must pay extreme attention to design equitable processes in every regard. There are also a few newer philosophies on compensation that are gaining popularity with evolving HR practices.
One Size Does Not Fit All
Probably one of the most dated approach in addressing absolutely everything that is usually responsible for giving birth to a new approach; that is, ‘One size does not fit all’. Proper compensation and benefits programs can promote job satisfaction within the employees. Moreover, motivation could be bolstered and in turn be beneficial in retaining talents whilst increasing efficiency. As the ranking system has met its maker, it is now time to brutally murder non-differentiated pay schemes. Paying for projects completed or on the basis of performance makes a lot of sense in all of our opinions. It is hard to fathom that there are still companies that pay on the basis of classifications with little to no dynamism on compensation and benefits plans. It is our collective cry that funds must be allocated to reward high performers with consistent performance reviews plans in regards to performance management and personal development cycles.
What is a “Cafeteria Plan”?
Cash payments alone are no longer considered the sole component of compensation and benefits program. There is that ‘extra’ everyone craves for and compensation & benefits are increasingly seen to transform into other different forms and ways. Not everybody’s life is the same and requires same sort of benefits, for some that extra cash is important to book that summer holiday and some prefer to have flexible working hours to be able to spend more time with kids or learn Mandarin. This has called for a revolutionary “Total Rewards Philosophy” which is designed to focus on all and different wants and needs of individuals within an organisation. Similarly, young high flyers individuals prefer further learning and development opportunities and Career succession opportunities within the company. Similarly, to the older workers and the ones close to retirement, benefits in the area of pension, health cover and paid time offs are more favourable.
For this reason, a new philosophy dubbed, “Cafeteria Plan” is becoming popular among top performing companies around the world. Just like our school cafeteria, if we aren’t too old to remember, this scheme offers us choices for us to have on our plate and be completely satisfied with.
Synergy with Talent Management
At the end of the day, rewards program and compensation plans are never really detached from other key HR practices within any organisation. In this particular case, we cannot look past its influences in the Talent management process. In general, employees are happier when their organisation recognises and compensates their contributions adequately. Happier employees will result in a more cheerful and efficient workplace. This is not only influential in the talent retention and attraction procedures of the organisation but also in creating a compelling Employer Value Proposition. In today’s time where transparency is promoted, it does not take long to get the word out from any workplace. This is true for both positive and negative remarks about the company. Especially if it is in the area of treatment of employees and the fairness in reward programs.
In instances of recognising high performing individuals or in case of an employee making a significant contribution to the business, Fair compensation and benefits program comes in real handy. It not only ensures that the efforts of the individual are recognised but also opens a channel for better and more efficient talent management programs
Technology Binding It All Together
Due to our dependency on modern day technology and the availability of digital HR measurement and management tools, technology is often found embedded into the heart and soul of all HR processes. Compensation and benefits processes are also relying and resorting to today’s technology. One area in which technology is increasingly influential is the global harmonisation of compensation strategies and frameworks, in every major country around the world. This is often done through the adoption of globally aligned job and career frameworks that are regularly benchmarked and evaluated.
Technology that is clearly connecting the world has a telling effect on the talent market as well. Work places have now become a global playground where people are more likely to move to a foreign land for better benefits and future promises. It was difficult enough to attract and / or retain employees whilst competition with the local businesses. Now the game has been taken to whole another level. The ones who were worrying about playing a local team on a Sunday afternoon have now found themselves at the ‘World Cup’ stage.
The end is evidently here for the monetary only compensation and benefits systems. Money cannot buy you everything and it certainly doesn’t buy hard working, motivated, loyal employees. Rewards are now demanded to be served in a cafeteria style menu options rather than boring packaged meals for the military.
A resolute compensation and benefits philosophy such as the ‘Total Reward Philosophy’ is now sweeping the global organisation and the ones that are left behind are in real risk of not only losing their best asset but also face difficulty in attracting talent in the future. Through technology, all of company’s activities, plans and policies are now becoming transparent. Top Employers around the world are fast adopting and adapting to the recent practices in Compensation and Benefits.
No organisation with high performance goals can now treat Compensation and Benefits as the part of the HR administration. Instead, it is now globally recognised as an integral part of the Talent Management process within an organisation. Besides all of the revolutionary philosophies in place, there is certainly a room to grow further. But the question is, what’s next?
Our HR Insights Report on Compensation and Benefits contains other useful information including latest trends and case studies.