Skip to main content
Article

Equitable Total Rewards: Driving resilience and sustainability

Talent|Total Rewards|Wellbeing|Future of Work
N/A

By John M. Bremen , Amy DeVylder Levanat and Carole Hathaway | December 02, 2020

From the triple crises posed by 2020, a new total rewards model has surfaced that highlights six emerging trends.

In February 2020, which seems like a century ago, we published an article in The Journal of Total Rewards suggesting that fairness in total rewards goes far beyond pay, and a focus on diversity, equity and inclusion extends to all elements of the portfolio – including pay, benefits, careers and wellbeing.  We observed the result is good for performance, fostering wellbeing and driving engagement, productivity, business outcomes and sustainable financial returns. And it helps companies address social imperatives of investors, consumers and employees.

Since then, the triple crises of 2020 have challenged employee wellbeing across physical, emotional, financial and social dimensions. The COVID-19 pandemic has underscored the value of the health, safety and contributions of people to business success. The resulting financial crisis has caused additional disruption and uncertainty. Concurrent worldwide protests have brought to light many societal inequities both inside and outside the workplace.

Companies around the world moved quickly to reimagine work to balance safety and business continuity. They stepped up efforts to address inclusion and diversity (I&D) – with a greater focus on equity. In parallel, total rewards teams advanced their portfolios to align with wellbeing, new ways of working and I&D, using the “equity trifecta” of pay, benefits and careers to drive organizational resilience, workplace dignity and human capital sustainability.

This disrupted environment has surfaced a new total rewards model that highlights six emerging trends focused on creating total rewards equity, emphasizing flexibility, and putting wellbeing at the center.

Trend 1: Total rewards and wellbeing have become interdependent


Prediction: The total rewards function will increasingly align with wellbeing – not just “include it” in the portfolio.


Even before the pandemic, research and experience showed that total rewards program priorities were shifting toward a greater focus on wellbeing. In 2019, two-thirds of companies reported incorporating wellbeing into their overall benefit strategy, according to Willis Towers Watson’s 2019/2020 Benefits Trend Survey.

The subsequent Willis Towers Watson 2020 COVID-19 Benefits Survey showed that:

  • 45% of companies made changes to benefits and 44% planned to make changes in the next six months.
  • More than half were looking to enhance wellbeing programs focused on physical, emotional, financial and social wellbeing.
  • About one-third planned to make health care changes.
  • About one-fourth planned to make caregiving benefit changes.

Responding companies also reported a direct connection between the crises and employee wellbeing in four wellbeing dimensions:

  • Health and safety risks → Physical wellbeing
  • Economic uncertainty → Financial wellbeing
  • Unrest, inequality and disruption → Social wellbeing
  • Combination of all factors, plus anxiety, stress, loneliness and isolation → Emotional wellbeing

CHROs and total rewards leaders also reported increasing awareness of the role that all total rewards elements play on wellbeing in ways that may not be new but now are framed very differently. For example, organizations began connecting the impact of pay programs on financial wellbeing, while also looking at the role that social determinants of health and wealth play in exacerbating existing disparities within communities of color and lower socioeconomic status.

While it is not new to associate benefits with physical, emotional and financial wellbeing factors, connections between benefits and social wellbeing through diversity, equity and inclusion became more prevalent in recent years, as have efforts to address inclusive benefits that meet the needs of a broader, more diverse employee groups. Career equity and fair representation also have been tied directly to financial, social and emotional wellbeing, and indirectly to physical wellbeing.

As a result of these insights, companies increasingly have put wellbeing in the center of total rewards, as shown in the Equitable Total Rewards model in Figure 1.

Equitable Total Rewards

Figure shows a circle with wellbeing in the center and 4 quadrants: physical, financial, social and emotion. Outside of the inner circle benefits equity is above physical, pay equity above financial, and career equity above emotional and social.

Figure shows a circle with wellbeing in the center and 4 quadrants: physical, financial, social and emotion. Outside of the inner circle benefits equity is above physical, pay equity above financial, and career equity above emotional and social.

  Physical — Healthy body
Pay equity
  • (intentionally blank)
Benefits equity
  • Medical/dental/vision benefits
  • Virtual/telemedicine
  • Benefits quality
  • Paid time off
Career equity
  • Flexible work arrangements
  • Physically safe work environment

  Financial — Monetary security and control
Pay equity
  • Competitive pay
  • Pay progression
  • LTI wealth creation
Benefits equity
  • Retirement/savings benefits
  • Voluntary benefits
  • Financial literacy/decision support
  • Benefits value
Career equity
  • Reskilling/upskilling
  • Career journeys
  • Career progression

  Emotional — Psychological, mental, behavioral
Pay equity
  • Living wage
  • Aligned incentives
  • Pay clarity
Benefits equity
  • Behavioral health benefits
  • Mental health benefits
  • Real-time emotional support
  • Stress management
Career equity
  • Fair goals and performance expectations
  • Emotionally safe culture

Figure 1. The Equitable Total Rewards Model
  Social — Connection, dignity and belonging
Pay equity
  • Fair pay
  • Pay for skills/value
  • Pay transparency
Benefits equity
  • Benefits access
  • Flexible, customized benefits
  • Family-friendly; caregiving benefits
  • Purpose-driven benefits
Career equity
  • Inclusive representation
  • Anti-bullying/harassment
  • Culture of dignity

As such, many forward-looking companies report changing the names and/or remits of their total rewards functions to include wellbeing. They understand that wellbeing requires a mindset that goes well beyond health and physical wellness programs, and they acknowledge that fair pay, inclusive benefits and career equity have a significant impact. It stands to reason, then, that the billions of dollars, euros and pounds they spend on pay, benefits and career programs can drive and be optimized around wellbeing for maximum impact.

Trend 2: I&D is executed through total rewards


Prediction: I&D strategy will be executed increasingly by total rewards teams to achieve greater equity and impact within the organization.


Similar to wellbeing, companies were increasing the connection between total rewards and I&D even before the pandemic. Globally, 55% of companies reported incorporating I&D into benefits design to a great or very great extent, according to the  Benefits Trends Survey and pay equity has become a focus of global organizations for a number of years.

The crises of 2020 have created a moment in which companies are addressing I&D more broadly throughout the organization and its programs. The total rewards focus has been further accelerated by increased commitment to diversity, equity and inclusion through public statements of companies following the deaths in the U.S. of George Floyd, Breonna Taylor and Ahmaud Arbery, as well as through corporate social responsibility, sustainability commitments, and the continued adoption of environmental, social and governance (ESG) goals.

According to Morningstar and other sources, net investment inflows to ESG and sustainable investment funds continued in 2020 despite financial challenges, indicating a commitment by investors to these priorities, as well. Further, Edelman’s  2020 Trust Barometer found that consumers continued increasing their pressure on companies to align with purpose and values, with data showing 80% of consumers want brands to “solve society’s problems.”

Consumers are holding companies particularly accountable for:

  • Setting an example within the organization of diversity, equity and inclusion (64%)
  • Reflecting the full diversity of the local country in their communications (63%)
  • Making products accessible and suitable to all communities (61%).

And there are consequences for brands that fail, according to Edelman; 52% of respondents of color said they would not work for a company that fails to speak out on addressing racial inequity, and 60% of Americans said they would boycott a brand based on its stand on racial injustice.

Equitable total rewards also have been fueled by greater focus on gender disparities at work and protecting the progress of gender diversity. According to  McKinsey research , women’s jobs are 1.8 times more vulnerable in this crisis than men’s jobs. While women comprise 39% of global employment, they account for 54% of overall job losses. Women, in particular report feeling overwhelmed, exhausted and burned out at work, and disproportionately responsible for duties at home as caregivers. As such, companies are responding to the fact that one in four women are considering a downshift in careers – or leaving the workforce entirely – according to  2020 Women in the Workplace Report  by McKinsey and Leanin. 

Equitable total rewards also support a focus on race and ethnicity, as the pandemic continues to shed light on the impact of COVID-19 on  racial disparities for communities of color and the most vulnerable members of society affected by  social determinants of health, including access to health care, job occupation, gaps in education, income and wealth and housing/living conditions. In the first few months, the  CDC found that Black or African American, Non-Hispanic persons and Hispanic or Latino persons were 4.7x and 4.6x respectively more likely to be hospitalized due to COVID-19 compared to White, non-Hispanic persons. Equitable total rewards are a tool that organizations are using to respond to this need as a key business imperative and means to improve the health, wellbeing and access for all their employees.

The role of equitable total rewards in meeting all employees “where they are” and “where they want to go” has accelerated. Understanding the preferences of a diverse employee pool through listening strategies and optimized total rewards with a lens on equity becomes the highest priority to know what to change and for whom. Companies have realized that building a culture of inclusion is essential, and unless (and until) they address equity through their sizeable total rewards investments, they can only go so far in enabling their desired cultures.

The role of equitable total rewards in meeting all employees “where they are” and “where they want to go” has accelerated.

Trend 3: Treating people fairly does not mean treating them the same


Prediction: Choice, customization and personalization will expand exponentially.


Traditionally, companies have defined “fairness” in broad brush strokes as “treating people the same.” However, as workforce diversity increases, it becomes clearer that different employees have different needs and priorities.

As more members of society proclaim they want to be “seen,” companies must understand and support their differences. For example:

  • Employees in different racial or ethnic groups often report having different total rewards needs and preferences from each other.
  • Late-career employees have different needs and preferences than early-career employees.
  • Employees in India have different needs than those in Germany.
  • Working parents of young children often have different needs than those employees without children.
  • Working mothers have different needs than working fathers.

The list goes on, but the one factor in common is that each of these groups wants to be seen, heard and understood — and they all want their needs met. In response, companies are getting serious about expanding equitable total rewards to consider the individual needs of a diverse workforce.

Take gender cohorts as an example. Organizations are aware of the impact that job loss for female employees can have on workforce composition. Amid disruption, the greatest opportunity companies have to engage and retain existing female talent is to provide the necessary programs, practices and policies that address their key needs. These include enhanced flexible work arrangements (both spatial/where work gets done and temporal/when work gets done), dependent care programs including enhanced caregiver access and subsidies, and enhanced wellbeing programs to help address physical, financial, emotional and social challenges.

Historically, age and gender have been the primary equity focus for many companies, but that’s changing. Willis Towers Watson’s  Global Priorities for Employee Benefits survey reported that ethnicity was the least-focused-on area prior to 2020, but in 2020 there was a 43% increase in companies planning to build considerations into employee benefits and pensions in the future for this employee cohort. In the second half of 2020, we saw this more fully take shape.

To address racial inequities, organizations began using employee listening strategies such as virtual focus groups and conjoint surveys to learn about the preferences and needs of employees of color. They began digging into existing programs, practices and policies to determine where bias might exist in the talent lifecycle, including the way employees experience the organization through total rewards.

Focusing on the needs of a broader, more diverse workforce requires greater choice, flexibility and personalization in total rewards – all elements that help shape the way employees experience the organization. Behavioral data support the view that choice and personalization are connected to I&D, and are valued by employees across a broad range of demographics. Most people believe they can make more appropriate choices for lifestyle needs and preferences than their employer. In environments in which choice exists, an identical mix of benefits choices occurred only once in every 154 enrollments, according to research by Steve Nyce and Jari Greenbaum in Benefits Quarterly, demonstrating the diversity of needs and preferences among plan participants.

The global crises also have highlighted the conflict between total rewards equity and a strategy of segmentation for key talent groups. Most companies searched for the sweet spot between a homogenous approach and too much segmentation that would lead to over-complexity. Success meant determining the critical cohorts to differentiate and then deciding whether to focus on to segmented design, choice, or personalized communication. (See Figure 2.)

The figure shows and x and y axis (x – number of segments and y – extent of differentiation). No segmentation is ‘one size fits all’ which is too general and ineffective. Next is design, choice, and communication, increasing in both extent of differentiation and number of segments. Lastly, in the upper right, we have too much segmentation, which is complex, inefficient and expensive.
Figure 2. Segmentation range

Total rewards is the greatest controllable spend of a company; shouldn’t it have the greatest impact?

Trend 4: Total rewards advance new ways of working and a new employee experience


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


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.

Willis Towers Watson research shows that the percentage of employees around the world who are working remotely surged to 65% during 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."

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 wellbeing programs (e.g., caregiving benefits, distributed healthcare, social wellbeing 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


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


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.

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, wellbeing and other contemporary drivers of growth and long-term shareholder value.

Companies that measure key elements of healthy company culture and then structure key programs around them achieve higher business results.

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%
  • I&D: 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


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


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.

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 wellbeing 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 considered), 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, wellbeing, I&D, 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 wellbeing, new ways of working, and equity manifest themselves through Total Rewards today will help drive greater employee impact tomorrow.


This article originally appeared as a 2-part series in WorldatWork’s Workspan Daily.

Authors

Managing Director, Human Capital & Benefits, and Global Head of Thought Leadership and Innovation

Senior Director, Human Capital & Benefits

Global Practice Leader, Rewards

Related content tags, list of links Article Talent Total Rewards Wellbeing Future of Work
Contact Us