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Generational Preferences Starting To Affect Rewards Design
 

by Kathy Gurchiek  4/8/2008
 

Arming themselves in a battle to attract and keep qualified employees, employers are starting to customize the total rewards package they offer to meet employee needs, according to the 14th annual Top Five Total Rewards Priorities Survey.

Four years ago, only a little more than half of U.S. employers identified the ability of their awards program to attract, motivate and retain talented workers among the top five challenges of their total rewards program.

Fast forward to 2008: 74 percent of 413 employers surveyed said it was the biggest of their total rewards-related challenges.

Looking at their top organizational challenges, a shortage of qualified workers—and the ability to motivate and retain them—topped the list.

Given these challenges, employers are starting to customize their total rewards packages with an eye to generational preferences.

That’s according to the online survey Deloitte Consulting LLP and the International Society of Certified Employee Benefit Specialists (ISCEBS) conducted in early 2008.

“Total rewards” was defined as all compensation, benefits, perks and any other direct or indirect payments to employees.

“In general it’s recognizing Gen Y tends to approach the workplace [with an] independent contractor mentality,” Deloitte Consulting LLP principal Dick Kleinert told SHRM Online. “They want personalized treatment, portability [of benefits]. They aren’t signing up for lifelong jobs.”

Some of the things employers are doing, he noted:

  • 84 percent are redesigning their total rewards strategy; among those, 76 percent plan to look at their overall design.
  • 60 percent are redesigning their retirement programs; among those, 75 percent plan to look at their defined contribution retirement plans.
  • 71 percent plan to increase communication and education to current and potential employees about their rewards programs.
  • 69 percent plan to increase their emphasis on performance-based pay.
  • 63 percent plan to provide better tools to help employees plan for their retirement.
  • 52 percent plan to introduce financial incentives aligned with their benefits to motivate employees to participate in fitness, wellness or disease management programs.
  • 51 percent plan to put more emphasis on learning and development programs that help employees enhance and advance their skills.

A smaller percentage plan to increase employee cost sharing for active employee plans—49 percent noted this vs. 62 percent in 2007, according to Kleinert.

“Employers realize … they can’t just shift costs, they can’t just stick it to employees. They are much more careful in what they’re doing. They’re much more proactive in what they’re doing,” Kleinert observed.

Just 32 percent of survey participants, though, have made, or are planning to make, changes to their total rewards programs. This tactic is more readily seen in health care, service industries and finance, less so in manufacturing and technology, the survey found.

Kleinert is surprised the percentage isn’t higher, but noted that it would have been less than 10 percent if employers had been asked five years ago about tweaking their rewards programs to reflect generational preferences.

That percentage likely will “rise sharply” in future surveys, the report said, “as employers begin to link their current worries about future talent management with a greater appreciation for the profoundly different attitudes about work and career expectations of Generation Y … vs. now-retiring baby boomers and even many Gen Xers.”

A key challenge for HR will be looking at what is important to different demographic segments.

Most benefits plans prior to the late 1980s, and even the early 1980s, were a one-size-fits-all design, according to Gary Kushner, SPHR, president of Michigan-based Kushner & Co.

“Regardless of who I was or what my needs might be as an individual employee, the company provided a set of benefits,” he said in a 2007 SHRM Online video interview.

Kushner is a former chairman of the Compensation & Benefits Special Expertise Panel for the Society for Human Resource Management and was an HR professional for six years before founding his company.

In the past 10 to 20 years, there has been a major shift as employers offer a “broad array of choices to an employee so they can pick and choose the best benefits to meet their individual or family needs,” he observed.

Employers can be creative and innovative in trying to meet employee needs and at the same time position the organization better “to attract and retain, the strategy that typically drives most employee benefits,” Kushner noted.

Concern over available talent trumps concern over costs, on the scale of priorities, Deloitte’s Kleinert pointed out.

“Programs have to be tailored, customized more for the workforce, and that really cuts across the full spectrum of reward programs,” he said.

“Employers are adjusting their tactics in recognition of those pressures” and are being more mindful of generational issues, whatever those generations may be.

It comes down to talking to your employees, Kleinert advises HR.

“For too long most employers relied heavily on benchmarking,” and that’s a “recipe for mediocrity,” he said.

Instead, employers should consider their business strategy, their employees and what employees value in order to attract, retain and engage top talent.

“Don’t assume you know what your employees want. Conduct focus groups. Interview them to really understand what engages them,” and realize that answers will differ with different segments of your employee population, he said.

While a shortage of qualified workers, and the ability to motivate and retain them, rank as employers’ most significant organizational challenges, according to the findings, the Deloitte/ ISCEBS survey found that the other top challenges are:

  • Changing workforce demographics, such as age, gender, culture.
  • Managing rewards and risks such as regulatory compliance, funding requirements, investor scrutiny.
  • Rising costs of total rewards.
  • Requirements and complexity associated with a global workforce and rewards programs.

Kathy Gurchiek is associate editor for HR News. She can be reached at kgurchiek@shrm.org.

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