‘Glitzy’ total rewards packages are obscuring the real needs of the workforce, a recent report has warned.
The Institute for Employment Studies (IES) has called out employers for masking a real need for better baseline pay and improved career progression opportunities with the “same plain-vanilla, copycat benefits choices”.
In the report, 2019: A Totally Rewarding Year?, IES said over-complexity and poor communications confused employees and ignored real pay declines experienced by most of the UK workforce since 2008. The problem also contributed to “poor and flatlining engagement levels” across the workforce and “the shocking pay gaps between genders and ethnicity groups in the UK”.
It added that total rewards packages were “easy and attractive to say and promote” but “fiendishly difficult to deliver”.
Duncan Brown, head of HR consultancy at IES and the report’s author, said organisational performance and national productivity would only improve if employees saw a genuinely rewarding future for themselves and their families ahead.
“If you look in a typical retailer, the one thing a typical shop manager will never do is break their pay budget,” he told People Management. “Yet there’s quite a lot of evidence that if you pay people more you get better customer service, you get better sales, you get the store in a much better state and it pays off.”
He added that there was often a disparity between the rewards and benefits packages businesses marketed to their employees and the realities of what employees received. Too many reward packages fail to address underlying issues of poverty and inequality in the wider economy, said Brown, and businesses need to look at the base pay they offer their lowest paid employees.
“There’s contrast between what you see in terms of what a lot of employers promote and communicate and the actual experience of the employees – there seems to be a big distance in that,” he said. “If businesses are going to realise the real benefits of a total rewards approach then they need to change tack. Ultimately, base pay is key for most people so you need to get your policies right on that.”
Brown said the UK had seen “a shift over the past decade towards a low-skills, low-paid, low-engagement, low-productivity workforce,” altering employees’ needs.
In May 2018 the TUC found real wages were worth £24 a week less than they were in 2008. Forecasted to return to pre-financial crash levels in 2025, real wages will have by then been in decline for 17 years.
The IES report cited research that found cash-strapped millennials spent almost a quarter of their income on housing: three times more than the pre-war generation. More than one-fifth still lived with their parents, compared to 17 per cent in 1996.
The report urged employers to align pay and reward policies with other HR, talent and diversity management practices in order to properly tackle workers’ changing needs.
It also said any effective total rewards package was based on a secure foundation of a decent base pay level, combined with providing all employees – especially the lowest paid – with real career progression opportunities. Brown added attention to mental health and employee financial wellbeing support was vital.
Reacting to the report, Charles Cotton, CIPD senior performance and reward adviser, said a reward strategy based on the concept of total reward was unlikely to be engaging for most employees.
“They are probably more likely to understand and appreciate an employer approach that is based on employee financial wellbeing or ‘good work’,” he said. “Both of these give an indication of purpose and direction, which should create value for the organisation and be beneficial for its employees and other stakeholders.”