As organizations become more flexible and adapt to new ways of working, pay and benefits are becoming more agile as well. People no longer want only the monetary aspects to be in place, but look for pay and benefits as part of the overall workforce experience (Wx) package. They want to work at companies whose cultures align with their individual core values and provide them opportunities to thrive and grow.
While it is still important to pay for performance, people are willing to accept lower salaries as long as they work in the right cultural environment. Over 86% of millennials would consider taking a pay cut to work at a company whose mission and values align with their own. The message for senior leaders is clear. Money is an important factor but not the only one in contributing to a Wx that people cherish. However, there are various aspects of pay and benefits that can be aligned to create an exemplary Wx.
1. Fairness – People must feel fairly paid as compared to coworkers. In a world where nearly 30% of employers are not even aware that there may be a pay gap, perceived unfairness could be detrimental when it comes to internal pay and benefits comparisons. In addition, people must also feel that pay and benefits are at par with similar roles across the industry outside the organization. Any gaps here can lead to turnover as well as difficulties in attracting the right kind of talent.
2. Cultural Significance – The pay and benefits cannot be a ‘one-size-fits-all’ across the world. Cultural and geographic nuances need to be taken into account to provide people with pay and benefits that best integrate with their Wx. For example, people in Asia who live in larger families might value medical insurance coverage for parents more than nuclear families in Europe or the US. Similarly, the definition of minimum wage and living wage could vary as well, depending on the purchasing power parity in a particular country.
3. Hierarchy of needs – Research states that people look for meaningful work and would be willing to take a 23% hit on lifetime earnings to find meaningful work. Considering this is more than the average percent spend on housing, it means meaningful work is at least as important as, if not more important than housing needs. Hence, Maslow’s needs hierarchy might actually need a revision to state that pay and benefits can be compensated for (to some extent) by the quality of work.
4. Equity and Inclusion – Pay and benefits should not only eliminate gaps based on gender, gender identity and race but also address diversity needs equitably. For example, medical benefits for someone from the transgender community could include the cost of gender reassignment surgery. Coverage under other policies could cover same-sex partners as well.
5. Communication – Companies need to have a two-way dialog with people and include elements of pay and benefits that people demand as per their changing career and life stages. A ‘buffet-style’ pay and benefits package can make financial sense for the company as well as give people the feeling that they are cared for.
The Wx that people have has a ‘monetary value’ in the sense that some part of pay and benefits is dispensable if the overall Wx is of value to them. Hence, the onus is on leadership teams to factor in the needs of their people and create a workforce experience that matters.