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Corporate Pay and Reward Systems Failing to Address Urgent New Employee Needs, Says New Josh Bersin Company Research

  • Remote work, inflation, and massive job changes from the pandemic have upset corporate pay strategies, leading to pay inequity and compensation inconsistencies in too many companies
  • Only 9% of companies have effectively addressed pay equity issues and redesigned their pay-for-performance models to address new models of remote and hybrid work
  • In-work benefits, which now make up 32% of all payroll, no longer sufficient to meet employee demands for inflation-adjusted pay
  • HR and benefits departments are urged to embrace a new model of “Systemic Rewards”

OAKLAND, CA., 4 May, 2023—The Josh Bersin Company, the world’s most trusted human capital advisory firm, today launched new research that challenges the pay practices that in the post-pandemic, inflationary world of hybrid work, multi-generational workforces, and tremendous demand (and legislation) for pay equity are no longer viable.

While most compensation departments have had standard pay bands and performance-based pay for years, this newest Josh Bersin Company research, The Definitive Guide to Pay and Benefits: The Road to Systemic Rewards, shows these models are falling behind.

In response, The Josh Bersin Company says it’s time to rethink corporate compensation and focus on fairness, transparency, inflation-adjustments, and a systemic look at performance-based pay. This is particularly necessary given the analysis reveals that pay and rewards are now the top drivers of employee experience, with 44% of employees believing they are underpaid.

The research outlines a new employer mindset and pay paradigm of “Systemic Rewards.” This approach, recommends the analysis, better reflects evolving workforce requirements and balances pay equity and pay for performance with personalization options. Overall, the research indicates that Systemic Rewards work because they focus more benefits dollars on flexibility, career, and recognition.

Key findings include:

  • Just 9% of companies have achieved the highest level of rewards maturity, “Systemic Rewards”
  • Organizations with the new approach are 3.1x times more likely to innovate effectively and 2.4x more likely to be recognized as a great place to work when compared to traditional “Total Reward” approaches
  • 8 of the top 15 rewards practices relate to pay equity, yet only 5% of companies are effective in this area
  • 90% of organizations don’t provide easy-to-use technology for pay and benefits that’s fully integrated with other systems—even though this is fundamental to a great employee experience
  • On-demand pay is a huge, missed opportunity: 97% of companies are failing to take advantage of this easy means to provide workers with financial security and flexibility
  • Pay for performance is crucial to pay equity and fairness, but as many as 91% of companies get it wrong. When it’s done right, organizations are 2.7x more likely to effectively engage and retain their workforce
  • Although many companies are aiming to achieve a more skills-based work model, only 5% of organizations have a defined strategy for skills-based pay–but those that do are twice as likely to innovate effectively
  • 100% of high-performing companies pay at or above average, but they don’t throw money at their teams
  • The best-performing companies are 50x more likely to analyze what rewards programs candidates and employees find valuable.

The Definitive Guide to Pay and Benefits: The Road to Systemic Rewards is based on a broad-based, global industry study by The Josh Bersin Company involving recent “Big Reset” discussions, an Excellence Survey spanning 448 organizations globally, delving into 94 practices, and detailed data analysis and deep-dive interviews.

The research also includes case studies featuring pay equity journeys at global brands including Salesforce, Schneider Electric, American Airlines and Unilever. It also surfaces innovative strategies at Cinemark (involving schedule flexibility, swapping, and autonomy), NewYork-Presbyterian (on-site childcare and career pathways), Metz Culinary (on-demand pay), HSBC (talent marketplace), Bon Secours Mercy (tuition-free career pathways), Intuit (goal-driven performance management), and Lowe’s (quarterly bonuses and small raises to help associates keep up with their finances).

Included in the report is The Josh Bersin Company’s Framework for Rewards, showing a systemic approach to pay and benefits which encompasses:

  • Competitive compensation
  • Generous benefits
  • Health and wellbeing support
  • Flexibility, career and purpose
  • Pay equity.

The framework also provides guidance for how rewards are delivered, spanning:

  • Philosophy and strategy
  • Technology and analytics
  • Change and communication.

Kathi Enderes, global industry analyst and Senior VP of Research of The Josh Bersin Company, said:

“The last three years have seen an increase in companies worrying about burn-out, mental health, and work-life balance for their employees. Today, with rising inflation and a slowing economy, a new issue has emerged: pay is now the number one concern for workers around the world.

“As pay (and especially pay equity) are top-of-mind for employees, an old-style ‘Total Rewards’ approach is no longer enough. Instead, leaders need Systemic Rewards: a way to harmonize equity, personalized benefits, career support and recognition, pay for performance, and skill-based pay. Not all of these elements will be ‘owned’ by the Rewards function, so it’s critical that HR teams collaborate across the organization with L&D, talent acquisition, DEI, EX, and talent management to provide a compelling, engaging employee value proposition.

“Instead of static job descriptions, rigid structures and ranges, and one-size-fits-all benefits plans, today’s workforce demands pay and benefits that are as agile as the work people perform, recognizing the value people bring to the company. It’s time for Rewards to move into the 21st century.”

Josh Bersin, global industry analyst and CEO of The Josh Bersin Company, said:

“A more systemic approach to pay and benefits is the best way to make your company ‘irresistible’ to current and prospective employees but, to be effective, requires collaboration with other HR domains (talent acquisition, learning and development, talent management, people analytics, employee experience, diversity, equity and inclusion) and with business leaders to solve business problems with the right rewards approaches, not just deploy rewards programs.

“‘Total Rewards’—the accumulation of many different benefits and rewards types—was designed for the old world of work, and hasn’t kept up with the changes to work and evolving workforce requirements.

“A new way is needed, ‘Systemic Rewards’—a new pay paradigm that balances pay equity and pay for performance, pays fairly, personalizes the employee’s options available and reinvests benefits dollars to focus more on flexibility, career, and recognition.

“The leading practices discussed in this timely research highlight what’s possible when employers think again about pay and benefits.”

In advance of the official launch at the main conference, May 3-5, in Las Vegas, Human Resources Executive’s Health and Benefits Leadership Conference 2023 hosted a preview webinar with select high-level findings of the new research on April 20. To learn more about the research and to download the complimentary infographic, visit joshbersin.com.

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