Rewards professionals constantly have to balance the needs of employees, while maintaining an eye on cost.
But a new survey of C&B leaders by Vlerick Business School found that less than half of compensation and benefits professionals think they have the skills needed to translate business strategy into reward policies.
Said Prof. Xavier Beaten, “Effective reward managers should look beyond the merely technical aspect of the matter.”
This, he added, implies that they need to be able to explain the reward system to their staff, and to establish a link between the corporate context and activities on the one hand, and reward policies on the other.
“Good compensation and benefits managers have three important roles to fulfil – that of an engineer, a strategist and a salesman.”
Here are the top tips from the report in building a rewards system:
1. Non-financial aspects are more important than money
Despite the spotlight constantly landing on monetary compensation, research found that non-financial aspects such as autonomy, colleagues, and the company’s reputation can be more important.
“Reward models should be aligned with the corporate strategy – aspects such as customer intimacy, operational excellence or product leadership. If your strategy focuses on innovation, for example, flexible reward components take centre stage.”
2. One-time bonuses work better than an increase in basic salary
“When it comes to compensation, employees are not rational,” pointed out Beaten.
The research found the impact of a one-time bonus on employee performance is five times greater than that of a small increase in their basic salary.
3. Employees do not know what compensation packages include
Better communication can help to unearth a greater appreciation by employees of fringe benefits they are receiving, which can easily amount to 25% of the total package.
“Today, communication is often limited to the technical aspects of the salary package. Managers should explain the reasoning behind the compensation philosophy better and substantiate their decisions.”