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Part II: Manifesting Long-Term Resilience and Sustainability

This is Part II of a Two-Part Series. Click here to read Part I.

Trend 4: Total Rewards Advance New Ways of Working and a New Employee Experience

In this article, “resilience” is defined as the ability to recover quickly from difficulties or adversity, and “sustainability” refers to the ability to be maintained at a certain rate or level.

The triple crises of 2020 accelerated companies’ decades-long efforts to shift to more flexible ways of working. Throughout the pandemic, companies have focused on the basics of getting work done to meet demand as a short-term coping measure, while remaining acutely aware that they also need to accelerate their investments in automation, digital transformation and new work practices to offset the cost of reconfiguring operations and shifting talent preferences. New thinking in total rewards support and advance the new ways of working.

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Prediction: The role of total rewards will factor even more heavily into employee experience, creating a greater sense of engagement and trust between workers and employer.

Willis Towers Watson research shows that the percentage of employees around the world who are working remotely surged to 65% during the pandemic, compared to 11% pre-pandemic. While all employees will not be able (or want) to work remotely for extended periods, indications suggest that the post-crisis instance of permanent remote working could be around 30% — nearly three times higher than pre-crisis levels. Hybrid working arrangements likely will be far more prevalent for jobs that can be conducted remotely for at least part of the time.

Leading companies have changed the discussion from “returning to the office” to “reimagining the workplace.” These organizations are evolved in their thinking regarding the role the workplace can play in the organization’s broader ecosystem. A focus on caregiving policies, safe occupancy levels and collaboration technology demonstrated that a broader view was needed. Successful approaches focused on long-term worker well-being and flexibility in real estate footprints, enabling technology and total rewards.

Leading companies also shifted the discussion from “work from home” to “work from anywhere.” Aligned with the total rewards philosophy that reflects options from which employees can choose, many employers provide workers with the ability to work wherever (and whenever) makes sense for them. Offering choice acknowledges the need for flexibility to a workforce that is increasingly demanding it.

These companies report offering equitable total rewards programs build on that flexibility, and support new ways of working by rethinking how people are paid (e.g., pay for skills vs. pay for value, geographic differentials), performance is measured (e.g., remote work output) and rewarded (e.g., employees working cross-business under skill-based talent-sharing practices). They also report rethinking the approach and frequency of measuring performance while retaining adequate flexibility in budgets for recognition programs and spot bonuses, as well as redesigning and personalizing reskilling pathways, benefits (e.g., for contingent workers) and well-being programs (e.g., caregiving benefits, distributed health care, social well-being of remote workers).

They also acknowledge that creating a high-performing and personalized employee experience in this environment across work and total rewards involves putting the employee at the center and designing programs under the assumption that components matter differently to different people in increasingly unique ways. They say that words and packaging matter, as does communicating total rewards in a language that is understood. When engaging employees in total rewards communications, leading companies consider the population, recognizing that employees — and their families — learn and engage differently. They also highlight diversity, equity and inclusion efforts that bring the composition of the outside world in. That means providing information in a way that it is known and accessible in the moments that matter.

Trend 5: Increased Focus on Human Capital Measurement, Including Social Factors of ESG

Intangible asset value as a percent of corporate valuations has risen steadily since the 1970s. Several studies of intangible asset market value demonstrate significant, proportionate growth of intangibles (e.g., in the S&P 500, from 17% in 1975 to 85% in 2017). Another study shows intangible assets of the five largest market S&P companies grew from $715 billion in 1975 to $23 trillion in 2018.

Prediction: Total rewards increasingly will drive elements of healthy company culture (i.e., dignity, psychological safety, physical safety, agility and innovation).

Investors know, for example, that companies following a set of practices relating to employee engagement and the employee experience are 93% likelier to report significantly outperforming their industry peers financially, according to a Willis Towers Watson study.   

Companies that measure key elements of healthy company culture and then structure key programs around them achieve higher business results. For example, boards and leadership teams increasingly have come to understand that, for many shareholders, ESG is an indicator of a company’s responsiveness to market and consumer changes, and a proxy for innovation, agility, well-being and other contemporary drivers of growth and long-term shareholder value.

ESG investing is estimated at $20 trillion to $30 trillion of assets under management, according to various estimates, equaling more than a quarter of all professionally managed assets globally. MarketWatch places the number in the United States at about $12 trillion. In addition, 80% of the world’s largest corporation use Global Reporting Initiative standards.

Finally, a recent study by Willis Towers Watson’s Global Executive Compensation Analysis Team found that 61% of S&P 100 corporations incorporate ESG metrics into their incentive plans. Of those, companies employ the following measurement areas:

  • People and HR issues (i.e., succession and talent development, employee engagement, culture): 39%
  • D&I: 29%
  • Customer service: 28%
  • Environment and sustainability: 18%
  • Governance: 15%
  • Employee health and safety: 13%

Trend 6: Organization Resilience and Sustainability Are Here to Stay

Boards and senior management teams recognize the natural tension between increasing focus on organization and workforce resilience and sustainability (and increased focus on human capital measurement and ESG), and the ongoing need to provide stable earnings and financial returns amid a long-term cycle of economic and market fluctuation.

Prediction: The type of flexible total rewards design and  financing/capital allocation strategies used during the pandemic will become institutionalized.

The percentage of companies that maintained or enhanced total rewards elements (such as pay and benefits) during the pandemic far outweighed companies that reduced them, according to extensive Willis Towers Watson research.

This research shows that, among companies that reduced headcount, pay levels were generally maintained and benefits programs were enhanced for those employees who remain. For example, 54% of companies enhanced well-being benefits, and only 5% reduced them. And 30% of these companies increased health benefits while only 4% reduced them. The same was true for caregiving benefits, paid time off, sick leave, voluntary benefits and perks, group life insurance and group disability programs. Investment in retirement benefits slipped slightly, but generally remained stable.

These investments in total rewards generally were seen by leaders as essential to create more resilient employees who could maintain engagement and productivity during trying times and through uncertainty. However, leaders are now concerned about the sustainability of this level of spend over time — especially in a fluctuating economy. Leaders want to know how to build financially resilient organizations that continue providing sustainable financial performance, growth and value.

Managers acknowledge the challenges their companies will face with upcoming pay and bonus seasons as well as the now-larger benefits spend, with all concerned asking what to do with potentially severely impacted budgets: Spread it evenly? Focus on top performers? Retain critical skill groups? Address equity issues?

Because workforce resilience and sustainability are highly correlated with organization resilience and sustainability, the calculus is complex and requires previously unseen levels of flexibility in program design, spend, financing and capital allocation, as well as a realistic assessment of coping versus accelerating actions.

Such flexibility manifests itself through flexibility in design (including consideration of designs that previously were not on the table), focus on choice, refreshing optimization (based on employee preference and perceived value), addressing capital allocation and program funding, and updating governance to engage key stakeholders.   

These equitable total rewards strategies adopted during the pandemic that more closely align total rewards, well-being, D&I and new ways of working likely will become institutionalized during the anticipated upcoming periods of longer-term market fluctuation, disruption, and uncertainty. 

The opportunity to assess how well-being, new ways of working and equity manifest themselves through total rewards today will help drive greater employee impact tomorrow.

About the Authors

John Bremen is managing director, human capital and benefits and global head of thought leadership and innovation at Willis Towers Watson.

Amy DeVylder Levanat is senior director, human capital and benefits at Willis Towers Watson.

Carole Hathaway is a global practice leader, rewards, at Willis Towers Watson.


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