In this economy — with the current and future workforce — it’s vital to offer a total compensation plan of base compensation, incentives, benefits, time off, ancillary, etc.
Just like you would research a new product or service before launching it, including taking a futuristic approach, you need to study your workforce’s demographics to determine what employees want out of their jobs. Is there an ideal combination, a total compensation offering, that is competitive, cost-effective and compliant for all generations? Bottom-line, the answer is no.
A one-size-fits-all total compensation package won’t accommodate all employees. To attract and retain a diverse and talented workforce, you must offer benefits packages that speak to each generation’s values and lifestyles.
Pay for performance vs. talent
The traditional pay for performance model — where employees are rewarded for past performance — addresses only one component needed to retain the best performers. The new model is driven by differentiation.
An organization rewards employees by combining past performance, critical skills and experience, and future potential, in support of current and emerging business goals. The model also helps identify who and what are most valuable today and in the future.
Armed with this information, companies can offer top talent rewards and incentives to keep performance and productivity at peak levels and drive progress. They should also include an assessment of talent against future leadership criteria.
By recognizing employees with the potential to deliver more value in the future, organizations not only reward them for past contributions, but also provide incentives for future initiative and performance. Those who choose to overlook this process risk losing highly skilled employees to competitors.
Benefit depth vs. quality
Some employee benefits are a better fit than others for certain generations, so a robust (but not overwhelming) portfolio is warranted. For example, traditional PPO plans and voluntary benefits such as critical illness are highly valued by more mature employees, while HDHPs and voluntary products like accident insurance are more highly valued by younger generations.
Servicing debt vs. other expenses
Different generations have different types of debt, which plays into how they value various benefits. For example, certain groups have student loans, and others want higher salaries to save for retirement and pay off debt or mortgages prior to leaving the workforce.
Would certain employees be willing to accept a lower salary in exchange for help paying off their student loans, where others might be interested in employer-sponsored 529 plans to help them save for their children’s higher education?
Paid time off vs. retirement
Some workers want more time off; some want more retirement savings. Will employees be willing to sacrifice certain benefits for more or less PTO? Should the employer retirement plan contribution be more skewed to longer service combined with other factors, such as age?
Companies that want to recruit and engage a variety of employees should consider creating customized total compensation plans, which are meaningful but don’t interfere with business operations. Employers should then communicate and deliver those packages in ways that each group prefers. Remember, one size does not fit all.
Elliot N. Dinkin is the president and CEO of Cowden Associates Inc. Elliot’s strategic approach assists clients in the development of a total compensation benefit package that controls costs, adds efficiencies and enables the employer to attract, retain, motivate and keep employees engaged while meeting company objectives. Through his guidance, employers become more competitive by creating total compensation packages verses viewing benefits in silos.