This is the first in a series on compensation during the pandemic.
Effectively deploying a fair, equality-driven compensation plan has been an ongoing challenge for HR executives. Factor in the COVID-19 pandemic, and things get even more mind-bending.
For starters, it’s clear that accurate total reward data and a strong strategy are especially critical in the current unsettled economic climate. With some employers restructuring their workforces in response to the coronavirus’ impact, many lack a clear grasp of employee costs. Bottom line, according to experts, is that it remains surprising how few global companies have an accurate view of their true people costs.
And that’s where deploying the right technology can help HR leaders and employers successfully take on the compensation challenge, they say.
Ruth Thomas, co-founder and senior consultant at Compensation Limited, which offers global clients technology to manage total compensation, says the most critical hurdle during the pandemic—and beyond—is making the most of compensation dollars to unlock performance. That, in turn, can ensure that employers align compensation with key talent and business metrics to reward those who contribute the most toward business success.
Thomas cites Deloitte’s 2019 Human Capital Trends Report, which revealed that only 11% of respondents had reward systems that were highly aligned with their organizational goals. At the same time, she explains, pay fairness and transparency had emerged as critical in defining the effectiveness of rewards relative to the employee-value proposition—an even more acute need in a crisis.
“We know there is a direct correlation between perceptions of pay fairness and employee engagement,” Thomas says. “Unless you share information with employees, it is likely their pay perceptions will not align with reality.” The result? Negative perceptions that could mean employees become disengaged and may even choose to seek jobs elsewhere.
Thomas says the COVID-19 crisis has seriously impacted rewards, as employers hurt by the lockdown’s economic consequences have to manage costs while also maintaining some form of pay continuity and physical security for employees.
“As we begin to focus on the recovery phase, it’s clear the period of lockdown has had a significant impact on how we will manage reward,” she says. “The direct economic consequence is that we will be back to managing reward in a recessionary environment.
“Reduced pay budgets make managing pay differentiation and retaining key talent hard.”
To take on the compensation challenge, Unilever, the multinational giant, developed and rolled out an HR data consolidation platform, uFlexReward. According to Peter Newhouse, Unilever’s global head of reward, the system collates all costs related to employees (salary, pension, bonus, shares, etc.) into a single real-time platform.
“With that, Unilever benefits from a consolidated, accurate, real-time picture of our employees’ total rewards,” Newhouse says, adding that the uFlexReward solution has been so successful internally that Unilever spun it off as a company in its own right.
Working with Ken Charman, CEO of uFlexReward, to develop the solution, the company has been able to personalize reward, facilitate regulatory reporting and use analysis to identify and correct anomalies within the organization around areas like pay equality and diversity, Newhouse says.
Also, like many global firms, Unilever has been testing several scenarios to respond to the ongoing economic impact of the COVID-19 pandemic, with the unique advantage of having instant, real-time, access to all reward data for every employee in every country through uFlexReward.
“Without the uFlexReward system, Unilever would have to be like every other employer, relying heavily on using fixed pay as the comparator, and having to use pro-rata other forms of reward, which account for 30% of the total reward spend,” Charman explains. “This really distorts the picture, especially against those on lower pay because benefits are a much higher share of total reward for senior grades.”