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Benefits – Pros & cons of employee segmentation

Mon, 10 May 2021 13:04:57 GMT

For company’s, what are the advantages of segmenting the benefits that they offer to their people or segmenting their people when it comes to communicating the benefit package? Can such an approach help a company better target resources, or might it end up creating dissent and disunity?

While certain benefits tend to be on offer to all people (such as a seasonal parties, paid leave for bereavement or occupational sick pay), others are segmented according to things like levelling/ grade structure (certain benefits may be linked to status, such as a company car/ allowance), location (those in head office may have a wider range of benefits, such as an onsite facilities, than those who work in a local office).

One of the benefits of segmenting benefits is that you can target scarce financial rewards at key people in terms of their recruitment or retention. For example, a relocation package can help attract someone with the right skills and experience for the business, while a private medical package and generous pension scheme might encourage them to stay.

Another advantage of linking benefit provision to level or seniority, is that this can further incentivise individuals to acquire the skills and experiences that the company is looking for in its senior roles.

In addition, some senior people may like receiving benefits linked to status because it sends a message that they do a job that is valued by their company. While we may be reluctant to talk with about our pay, we may be happier to convey our success by parking a quality company car on the drive.

The drawback with segmentation is that some people who are unable to access these benefits because of their location, occupation or level may feel resentful, particularly if they know or think that those who do qualify for them already get paid more than them. Even if the benefit isn’t financial, some people who are not able to access that benefit may feel it’s unfair that some can. For instance, one kind of non-financial benefit is the ability to work flexibly. However, certain employees may not be able to enjoy this form of flexible working if they are employed in a job that is determined by fixed hours or location, for example, while their colleagues based in other parts of the company can.

Allocating benefits according to a certain set of criteria may result in some people perceiving that there is one set of rules for them and another for certain groups, leading to disharmony and poor productivity. To overcome this possibility Intuit can help company’s focus on the potential gains that each benefit brings and then explore how these can be provided to all people.

If they can’t, then Intuit can help the company evaluate the potential positive and negative consequences of segmenting particular benefits, and in turn be prepared to ask difficult questions as to whether some benefits should be offered at all. They should also ask people for their view of the benefit proposition. For instance, those who receive certain benefits that are associated with their status or seniority might feel embarrassed about getting them.

Even if this isn’t the case, the company should think about what it can do to ensure that the workplace is as inclusive as possible by breaking down any feelings of ‘them and us’. For instance, if providing private medical insurance to all people is not affordable, what cost effective health and well-being benefits can the company provide to the rest of the company?

While there can be advantages from segmenting the people, it can be difficult to create personalised messages based on a small number of characteristics alone, and company’s run the risk of pigeon-holing people incorrectly based on some flawed assumptions about a person’s situation based on their age, gender or circumstances.

There’s also the fact that company may not collect the data or, if they do, it may not be in the format needed to create and target their communications.

A more pragmatic approach may be for the company to craft and provide similar messages to all people, by defining their benefit philosophy and principles (why the company offers benefits, and how they support the business culture), which ultimately leads to the benefit proposition being offered to their people.

In summary, people segmentation can present opportunities to target more effectively both benefits and messages. However, there are challenges with this approach in that it can cause resentment among those not receiving certain benefits and confusion if the segmented communication is based on incorrect data or false assumptions. To get over these problems, Intuit can help company’s offer a benefits proposition that not only appeals to a wide range of people but also offers them flexibility so that people can select those benefits that best meet their needs.

To help people select their benefits, company’s need to have an education and communication approach that helps people understand the choices on offer and the various possible consequences arising from their benefit decisions. By adopting a more personalised approach to benefit provision and communication, people should be better able to value and appreciate the benefit package offering and company’s should see this reflected in their business and people metrics.

What’s the point of pay?

Mon, 10 May 2021 12:31:57 GMT

Research findings suggest that only 45% of employees think that their pay is appropriate for the job they do, given their responsibilities and achievements, while 36% do not, there is room for improvement. By way of comparison, overall job satisfaction is 64% positive. However, these subjective perceptions of pay are linked to objective amounts of money.

Objective evaluations are based around levels of pay. Subjective assessments are based around assessments of whether ‘this salary is worthy of my contribution’. Research would suggest that both absolute and relative aspects of pay interact significantly.

It’s interesting to note that people earning less than the voluntary living wage typically view their pay as unfair while those earning in excess of this regard their salary as fair. The amount of money they earn is just as important as how they earn it.

However, if you increase levels of pay and benefits it doesn’t necessarily feed through into significant benefits for the company. If you increase pay and benefits, this has only a moderate impact on job satisfaction and a weak impact on enthusiasm, effort and intentions to quit. Albeit we can assume that pay levels do play an important part in getting a person to join a company.

What are the implications of what research would suggest and the insights for how we manage people, including how we reward them?

It doesn’t mean that pay and benefits are not important, but the impact is influenced by other aspects of what makes for a good job, such as terms of employment (permanent, temporary, etc), job design and the nature of work, work-life balance, voice and representation, etc.

This means that it doesn’t matter how good your reward package is, its impact will be challenged if, for instance, employees are not satisfied with their health and well-being at work, the quality of relationships with others, or the opportunities they have in the company to speak directly to mangers, or through their communication channels and forums.

It also indicates where competitive advantage can be found. It’s not through reward and recognition polices themselves, which can be copied, but through how these policies are implemented in ways that support the other people management activity.

Similarly, the effectiveness of a company’s reward package ‘the deal’ will be enhanced if other aspects of people management, such as how jobs and work is designed, are aligned with the company’s reward philosophy, mission and vision, as well as how it puts its reward policies into practice.

In conclusion, the point of pay is that from the company perspective it is a means to an end, rather than an end in itself. It plays a part in supporting the company’s people management practices, while the company’s people management practices play a role in supporting its approach to pay.

Pay transparency

Mon, 10 May 2021 11:24:55 GMT

Pay transparency, a subject being discussed through numerous platforms, but what is driving this intrigue and how should companies respond?

When offering a reward, ‘the deal’, it will have a greater impact if you let people know that it exists and what they need to do to earn it. By being transparent, companies should be able to demonstrate to their people how their approach to reward supports the company and aligns to the purpose, the mission, the ‘reason for being’ and also that the reward reinforces where the company wants to be. By being open and transparent about how the company manages reward, employees are more likely to trust reward decisions and feel that a fairness is applied.

However, there are also some external factors pushing companies to be more open, most notably the requirements for large organisations to publish their gender and CEO pay ratios, and a government consultation on ethnicity pay reporting. This practice could trickle down to smaller organisations, either as ‘best practice’, or through legislative requirements and developments?

Furthermore, the ever-evolving social media platforms are making it easier to share personal reward practices ‘the deal’ through sites such as Glassdoor, Pay Scales and Indeed. It is also becoming increasingly more open practice for people to talk about their reward experiences and opinions on such sites as Twitter and Facebook.

There is also various research evidence indicating that pay disclosure can make a difference. For instance, research finds workers are more productive when salary is transparent, and that by keeping salaries secret is often associated with decreased employee performance.

However, before companies start preparing to consider or reviewing the introduction of ‘pay transparency’, they should first ask several questions. How should their company define pay, and should it include pension contributions and benefits in kind? Another question is what do others mean by pay? For example, companies might have one definition, while other regulators may define it differently for reporting purposes.

As well as pay decisions (in terms of pay rises or levels), will the company also be transparent about the pay processes that led to the decisions, such as how jobs are valued. And will information also be provided, such as how an employee’s pay compares with comparable jobs within the organisation?

In addition, who should the company be transparent with? Should it disclose information to its customers and investors? What needs to be disclosed to the regulators or the media? What needs to be given to the governing company board?

Companies may also need to think about the level of transparency they want. Should their company be fully transparent so that all their people can see all pay data, or should it share this data at an aggregate level, such as through medians or pay quartiles, and by reference groups, such as by jobs or ethnicity?

There are also several practical concerns that need to be considered before transparency can be introduced, including: is it what the company wants, is it the right thing to do; how much pressure is from the regulators; data protection concerns; and whether the measures used to inform pay decisions are easily shared?

Companies also need to define what is meant by ‘pay’ and ‘transparency’ as well as who tells what to whom, why and how. For instance, if line managers are going to be expected to communicate about the pay processes and outcomes to their people, what support does the company need to provide to them? What training / education will be required?

Intuit can have an important part in helping create and craft a pay narrative about what the company wants to reward ‘the deal’, why and how and to this share with their people as part of the transparency process. As well as assessing how this narrative compares to the reality and evaluating what policies and practices need to change and by when.

Because pay transparency is becoming more of an issue, doing nothing can’t be an option for most companies. So, Intuit can help companies become proactive, by starting early companies will be better placed to overcome the challenges, provide foundations for ‘the deal’ and take advantage of the opportunities.