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Compensation Sense: 2018 Employee Compensation and Total Rewards

Thursday, November 2, 2017  
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Compensation Sense: 2018 Employee Compensation and Total Rewards

When it comes to managing employee rewards, every year has unique forces, factors and strategies for success; 2018 employee compensation and total rewards are no different. But let’s imagine we are 10 years into the future, or 20 or 25. What will we see as the characteristics that defined and directed successful employee compensation and total rewards in 2018? Here’s what I see right now:

Variable Pay is the New Norm

In 2018, variable pay is the new norm across the board – from the lowest compensated entry level position to the highest-level executive position. Variable pay, of course, is often referred to as bonus pay. Why is it gaining favor for employee compensation? Low merit budgets continue to prevail, so employers like variable pay as it must be “re-earned” through productivity that leads to higher profits. If variable pay plans are designed effectively, they drive results and behaviors that employers want to achieve. The caution for 2018 and beyond, however, is that once a company-wide variable pay plan pays out 3 out of 4 times, it becomes considered an entitlement and is no longer a bonus.

Employees are Recognized as an Investment, Not an Expense

In 2018, it is an employee market again. If you “piss off” your employees, they will leave – because they can! Communication is key. Why? Because it helps overcome misperceptions about employee compensation and total rewards. Consider these statistics from a recent PayScale study: Two-thirds of employees who are paid at market believe they’re underpaid. Of those who believe they are underpaid, 60% plan to leave the employer. On the flipside, 82% of employees said they remained satisfied with their work even at below market pay as long as the logic for the pay rate was communicated. Successful 2018 employee compensation and total rewards demand that employers treat their employees as an investment rather than an expense – and keep them informed.

Employers Invest in Wellness Programs to Reduce Healthcare Costs

In 2018, healthcare costs continue to rise, so smart employers find that reducing those costs demands investing in true outcome-based wellness programs. Patience matters, however, because it can take a while to see the ROI. Another healthcare cost reducer is having on-site or near-site clinics to reduce lost productivity time. Simply put, improving wellness pays dividends in 2018 and beyond.

Goal-setting Gets Real

Goals have always been important to employee productivity and corporate profitability. But unrealistic goals can be dangerous because they can drive unwise and perhaps even unscrupulous behaviors to reach those objectives and quotas. Smart employers in 2018 remember the lessons of the Wells Fargo “fake accounts” scandal that came to light in 2016. What’s more, smart employers know that unrealistic expectations lead to employee resistance because they can be de-motivating and dispiriting. So, don’t ask employees to do more than you know they can. Instead, ask them to journey with you. Along the way, eliminate that 12-page annual performance appraisal form and build a daily coaching culture that helps everyone achieve reasonable goals.

Employers Focus on Employee Experiences and Recognition

In the employee market of 2018, smart employers create rewarding employee experiences and opportunities for recognition. But they also know that effective recognition is personal, not programmable. And they understand that employee retention improves when you recognize employees for doing things right – even small things – and when you create and honor defining moments and personal milestones.

The Bottom Line

Looking forward or looking back, 2018 employee compensation and total rewards play a significant role in the continuing success of organizations. It’s not just about base pay anymore. Instead, it’s about developing creative compensation programs, improving communication, setting realistic goals, focusing on wellness, providing rewarding personal experiences, and recognizing employees whenever possible.

To learn more about effective 2018 employee compensation and total rewards strategies, contact us today at 317.589.8529.

Cassandra Faurote