As the calendar opens to 2023, employees and employers alike have their minds set on budgeting and goals for a new year. The past few years have shown us that recruitment and retention in an increasingly remote world require vastly different strategies than in times past. The state of the economy and new regulations around pay disclosure make it challenging for companies to stay competitive, and compensation and benefits must shift to account for hybrid and skills-based work. Therefore, organizations will need to rely on deep data on their workforce to get their total people investment right. Here are five total rewards predictions for the coming year.
Regardless of Economic Conditions, Retaining Top Talent Will Continue to Be a Leading Priority for Executives
Great talent is always tough to find and can be even tougher to retain. And in an environment in which remote work is the norm, those key employees who can be relied on to deliver and have long-standing history with an employer will become more valuable than ever. Skills-based economies will start to develop more fully as companies look for more specific capabilities and hire for a particular skill vs. a role. For innovative companies to outperform, they need to smartly manage how they attract, engage, and retain their top talent.
Persistent Inflation Will Require Companies to Evaluate Their Total Rewards Strategy
With inflation at 7% and rising, employers will be hard pressed to match and overcome inflation through annual salary increases alone. Given this, employees need to know and understand the full value of their compensation beyond their base salary (think cash, bonus, equity, insurance, healthcare, and well-being benefits) so as not to leave any potential adjustments on the table.
Companies Will Find Increasingly Creative Ways to Reward Employees
The regulatory environment is rapidly changing. 2022 brought the disruption of the Dobbs decision, and more change is sure to come with the midterm election. Much of the design of total rewards programs will be subject to regulatory controls (i.e., pay transparency), which will force people teams to find creative ways to reward, and it will be incredibly disruptive for many companies as they find a way to remain attractive. HR teams will thus continue to flex their creative muscles to solve for fast-changing legislation; keep their organizations compliant; and keep their employees happy, healthy, and safe.
Hybrid Work Will Drive an Overhaul of Benefits Packages
Hybrid work is here to stay and requires companies to structure benefits in a way that’s different from what they’re used to. Commuter benefits will diminish in importance, while home office stipends will become more prevalent. Self-managed paid time off (PTO), whereby employees can determine their own time-off schedules without the worry of exceeding their allotment, will continue, with an increased call for resources that allow employees to truly unplug.
Employees Will Be More Accountable for the Value They Deliver Than Ever Before
With a distributed and increasingly project-based workforce, the onus is on employees to illustrate and prove their value. Employee empowerment will work both ways as companies look to identify those individuals who excel in the new environment. Performance reviews will no longer take place only at the end of the year but will happen continuously, with more of a focus on the entrepreneurial mindset and innovation employees are bringing to the business.
The Bottom Line
With companies placing more than 75% of their total spend in people, the success of the business is riding on getting this investment right. Making smarter people decisions that are backed by data is key to delivering measurable returns in employee productivity, engagement, and retention. Connected systems, benchmarking, deep data insights, and predictive modeling all play a role in getting businesses to the right total rewards strategy.
Kyle Holm is the VP of Total Rewards Advisory at Sequoia (on Twitter @sequoiaTPI). He is responsible for leading a team of rewards professionals who ensure Sequoia clients have compensation programs that attract, motivate, and retain their employees. Holm’s career has focused on all areas of executive compensation, including market compensation analysis, short- and long-term incentive plan design, severance and change in control arrangements, executive contracts, nonemployee director pay, and equity grant strategy.