How are incentives and rewards changing as we come back to ‘normal’?

As many companies creep back into offices, with their desk space lovingly arranged into a secure bubble guided in by stickers taking them to the watercooler, hand sanitiser and back again, we turn our attentions to what is happening to incentives and rewards right now.

After all, Chancellor Rishi Sunak has announced new measures to help kickstart the UK hospitality sector, including a 50% discount on eating out in August, capped at £10 per person. That’s probably an incentive everyone knows about right now and we are sitting on a precipice of being very incentive-driven.

Rumours of incentives to get us to shop, eat and work abound and we all feel we would like something in return for our long stretch of homeschooling, jigsaws by candlelight and compulsory family zoom calls, thank you very much.

So when you get to work, send a prayer to your HR and benefits teams who have been battling on through, to pinch a Rishi phrase ‘unprecedented’ times. The priority has absolutely been working hours, conditions, base salary and furloughed workers. But as we come back to (awful phrase alert:’New normal’) – what does this means for benefits, incentives and rewards?

If we start with employee incentives, there will be an understanding that the money tree that hasn’t materialised for many of us and many employees are simply happy to be in work.

While many companies cutting wages say the cuts will last three to four months (35 percent), an equal percentage say they have not yet determined how long the cuts will last.

(Korn Ferry)

That doesn’t mean that companies are in a position of power. As offices close and candidates see more companies working totally remote, there is an incentive to move. The furloughed talent that has been let go is also on the lookout – but just as with any recession, candidates soon become the ones who pick and choose between businesses.

Hadie Perkas, the recruitment expert in incentives and rewards explains:

“Recruitment will become a new game entirely for companies.  Between now and October, they will need to let staff go in areas where business is down, but companies will still need to invest in new skills that the business doesn’t currently have to get them back on their feet and out the other side.  Job profiles will change and there will be many candidates on the market so their challenge will be how to cut through the noise and identify the best talent with the most effective skills to drive their bounce back. ”

So incentives still have an incredible role to play.

A long-term and short-term incentive plan are a key component to any total rewards program but they are just that – one area. Businesses may well find that they are really leaning into the ‘variable’ of variable pay right now, and looking more to base salary and additional benefits.

There may be a real flip in how people are rewarded, and when. We all know key workers who have proved to be invaluable. Now is the time when we have to be empathetic and understanding and start to reward the right people in the right ways – hazard pay has a whole new meaning with a virus looking for a host.

Many companies have been quick to curb executive bonuses and salary and rewards are being demanded from the public for those who have been illegible or ignored before.

There are also big changes in lifestyle we didn’t foresee back in January.

Another phrase I think we will see more of is strategic workforce planning. In rewards and incentives, that’s mapping out who gets what, when and why. This is likely to dig up some historic inaccuracies or disparities and now is the time to get some clear vision about how to move forward.

Many organizations, according to the excellent Korn Ferry report, have already acknowledged changes in management practices over the next year or two. Seventy-five percent of organizations have signaled the need to continue to work more virtually. More than half (53 percent) say they will be more disciplined about cost management, and 40 percent say they will be more focused on employee engagement. Moreover, a majority of organizations (61 percent) expect to make changes to their total rewards programs during the next six months to two years, with 28 percent expecting significant changes.

Happiness (a goal that’s worthy in an anxiety riddled world) should also be on the table, and we will come out of our current woes stronger.

Korn Ferry adds “This pandemic, and the economic fallout it has created, also provides organizations the opportunity, if not the mandate, to accelerate changes in reward program management.  Organizations probably have more latitude—and a greater sense of urgency—to make necessary program changes than was likely the case before Covid-19. The issue is more acute for sectors such as non-essential retailers, leisure and hospitality, oil and gas and distribution organizations. They will have even more of a sense of urgency to make needed changes.”

What does that mean? Well, it sounds like we are going back in time and preaching to the choir, but we are banging the drum again for flexibility and correct job architecture. Jobs website Totaljobs polled almost 7,000 employees with workers on average willing to accept a seven per wage reduction to avoid returning to the office with more men than women wanting this reduction (27% vs 13%.) We won’t make this into a master analysis of why that is – gender pay gap reporting needs it’s own special space, but employees are incentivised by a better semblance of balance, autonomy and employee engagement done well.

Saurav Chopra of Perkbox adds “The lockdown period has been dubbed ‘the world’s largest work-from-home experiment’. Our study showed that a huge 60% of people had ‘never’ worked from home before the pandemic, but any employers who were previously reticent about adopting flexible working practices pre-Covid will have less reason for their reluctance – especially if they have made remote working a relative success amid today’s challenges. Although we think the office space is far from ‘dead’ in a post-Covid world, flexible working practices will be more readily adopted; if not it then it should merit serious discussion – particularly if the benefits relating to productivity, happiness and creativity is tangible.”

There is also a huge part to be played with financial education, support and guidance, providing access to discounted advice to support staff whose family members may be in difficult situations – empathetic measures.  Now is the time to look at job design, career development, job evaluation and external pay benchmarking processes to see how to measure up.

It means we need to get better at fit-for-purpose total reward strategies and sharpening up performance management programs. It might mean that our short-term incentive/bonus pay design changes with eligibility, goals, targets, thresholds, and exception management.

In short, there is no money tree, but there is an unmistakable shift in attitude and a wealth of change coming. Let’s brace ourselves!