It’s time to create a reward system fit for hybrid working

23 February 2021

by Alastair Woods Partner

Email +44 (0) 78 3425 0359

I have worked in reward for the past 20 years and in all that time relatively little has changed to the broad reward elements. Most organisations still take a ‘one size fits all’ approach with some flexibility in benefits.

But a confluence of factors, including the increased focus on diversity and inclusion, digital disruption, changing employee lifestyles and priorities, and the socio-economic realities of ageing populations mean a ‘one size fits all’ approach is no longer relevant.

And then there’s COVID-19. The pandemic has shaken up the world of work and ensured change that was long overdue in reward is now inescapable.

Here are five areas employers should consider as they plan a reward roadmap. While responses will be driven by many things - costs, business transformation, talent and skills challenges - these should be high on any to do list.

1. Update your approach to performance and recognition

In our consumer lives, instant feedback is the norm, on everything from the service we receive at the doctors to the coffee we buy on our morning walk. Yet many employers still run a process of annual reviews, generating a narrow performance rating, which defines pay and bonuses. Instead, employers should consider a suite of incentive schemes that can keep up with the pace of change in many roles and provide recognition for different needs - from greater use of team bonuses and project success awards to peer-to-peer tools that are becoming part of the reward fabric.

2. Be ready for hybrid working

As our relationship with the office changes, so must the links between the office and reward. It will be led by working styles and there should be a reward response to the different groups that emerge. Employers should be reviewing what additional financial support they need to provide home workers to cover costs of the home office. With many people planning to move away from the commuter belt, in line with plans to be in the office less, many organisations must also review the relevance of regional pay models such as London weighting. This will be one of the hardest changes because of contractual and fairness dimensions. Pay is fairly inelastic - even if locations are not.

3. Customise your reward deal

More organisations are starting to look at how they give employees greater choice. And there are connections into other areas of HR. For example, individuals could transfer their bonus into a learning budget, or trade benefits on a real-time basis - just as we do with points on our supermarket loyalty cards. A ‘reward passport’ which gives individuals a draw-down account for areas such as wellbeing spend, training and travel to the office will give employees greater autonomy to ensure their reward matches their needs.

4. Prioritise fairness and broader societal impacts

Fairness is an increasingly high-profile topic which strikes at the heart of an organisation’s culture and reputation. Reward and remuneration committees are playing an ever greater role reacting to investor and regulatory pressure to address pay as part of a commitment to diversity and inclusion. Reporting of pay gaps will continue, and organisations need to take a more proactive role in addressing imbalances in both representation and pay.

5. Link reward to outputs as well as inputs

Innovation, agility and flexibility are more important than ever and reward can play a significant role in enabling or hindering new working models. Flatter pay structures could allow for greater movement in an agile world. And what can we learn from gig worker models? A greater focus on outputs will also further liberate high performing employees from restrictive ‘nine to five’ thinking, putting greater emphasis on what they do, not where or when they do it.

At the heart of these changes, must be a recognition that employees need choices and a reward system that recognises their contribution, reflects a changing world and keeps them motivated.

To discuss any of the topics raised in this post, please get in touch.

by Alastair Woods Partner

Email +44 (0) 78 3425 0359