NEW REWARD MODELS IN AN AGILE WORK …...their Reward system • With digitalization high on the agenda, 29% of companies are planning change to better support their new company strategy

© MERCER 2019 0

SEPTEMBER 18-19

Asia HR Conference

NEW REWARD MODELS IN AN

AGILE WORK ENVIRONMENT

M E R C E R G L O B A L H R C O N F E R E N C E S

Puneet Swani, Sr. Partner

Career Business Leader International Region, Mercer

© MERCER 2019 1

L I V I N G I N A N E R A O F D I S R U P T I O N

M A C R O T R E N D S I M P A C T I N G T H E F U T U R E O F R E W A R D S

More than 90% of

executives are planning

organizational redesigns

R E S H A P I N G

O R G A N I Z AT I O N S

S T R U C T U R E S

D I G I T A L I Z AT I O N

A N D A I W O R K P L A C E

F O R M E

E X T E R N A L

S C R U T I N Y

“Digital natives” are entering

the workforce, demanding

the consumer grade

experiences

Activist investors, media

and regulators are putting

increasing focus on pay

equity

Technology is enabling the

digitalization of reward

programs, delivering better

experiences at lower costs

Demanding A G I L I T Y in

reward systems

Changing C A P A B I L I T Y

needs from rewards

F L E X I B L E &

P E R S O N A L I Z E D

reward solutions

T R A N S P A R E N C Y in

rewards decision making

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T H E E M P L O Y M E N T D E AL N E E D S T O S I G N I F I C AN T LY

C H AN G E

How can we translate our EVP into a Talent Experience Proposition?

ONLY 2 IN 5 EMPLOYEES BELIEVE THEIR COMPANY HAS A

COMPELLING AND DIFFERENTATED VALUE PROPOSITION*

G I G

E C O N O M Y

What can we do to embrace

the rise of the free agent?

F L E X I B L E

W O R K I N G

How do we create a culture

that enables people to

contribute under flexible

work arrangements?

W O R K P L AC E

F O R M E

How can we meet

individuals evolving health,

wealth and career needs?

How can we ensure our

proposition resonates with

five generations

C H AN G I N G

D E M O G R AP H I C S

* Mercer Global Talent Trends Study

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R E C E N T S T U D I E S C O N F I R M T H A T H R I S M O V I N G

C O M P A N I E S H A V E R E C O G N I Z E D T H A T A C H A N G E I S

N E E D E D I N H O W E M P L O Y E E S A R E R E W A R D E D

• Different economic conditions, talent

expectations and availability

demand for changes within HR, with

at least 70% seeing changes

required in their talent processes

• Over 55% of organizations already

have a change plan determined and

28% are ready to implement these

plans within the next 12 months

73

82

79

80

84

85

28

18

22

20

17

16

1

2

3

4

5

6

Changes required

No changes required or don’t know

All values in % may not total 100 due to rounding.

Change plans of HR organizations Comments

Leadership development

Talent review and succession

Career Management

Rewards

Workforce planning

Global mobility

Change plan determined, but resources not secured

Changes approved to implement within next 12

months

24%

27%

28%

% of companies require changes in HR

Deep-Dive: Rewards

Changes required, but no plan

79%

Source: Mercer Research, Mercer “Future Proofing HR“

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T O T A L R E W A R D S S T R A T E G I E S A R E B E I N G M A I N L Y

R E V I S E D T O B E T T E R A T T R A C T A N D R E T A I N T A L E N T

• As high quality talent becomes

scarce, the ability to better attract

and retain talent has become the

key reason for companies to revise

their Reward system

• With digitalization high on the

agenda, 29% of companies are

planning change to better support

their new company strategy and

management

• With the increased elimination of

performance ratings, 12% of firms

need to find a better way to align

performance management and

compensation & benefits

Change plans of Rewards Comments

Improvement in ability to attract/retain

Change in strategy and management

Alignment to performance management and/or other HR

Change in economic

environment

12%

29%

37%

Source: Mercer Research, Mercer “Future ProofingHR“

8%

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THE FOUNDATIONS OF HOW WE APPROACH REWARDS IS UNDER REVIEW

JOBS SKILLS vs

vs

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F O U R F U N D A M E N TA L C H A N G E S T O H O W W E D E L I V E R R E WA R D S

Lag: Benchmarking Lead: analytics and AI

Technical first Business first

Standardized Personalized

Value jobs Value

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R E W A R D F U N C T I O N E F F E C T I V E N E S S

O R G A N I Z A T I O N S A R E R E S H A P I N G T H E I R O P E R A T I N G

M O D E L S T O A L I G N W I T H E M E R G I N G T H E M E S

S T R AT E G Y T E C H N O L O G Y P R O G R A M S &

P O L I C Y R O L E S

G O V E R N AN C E

S E R V I C E D E L I V E RY

How will we distribute decision making responsibility and manage risks through authority and accountability checks?

What activities are done in the Rewards function, versus through technology, partnership with other functions, or automation?

© MERCER 2019 8

K E Y S H I F T S A T W O R K

F O U R K E Y T H E M E S I M P A C T I N G T O T A L R E W A R D S

CAREER FRAMEWORKS REWARD OFFERINGS

REWARD PROCESSES TALENT EXPERIENCE

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W O R K F O R C E S T R U C T U R E

T H E F U T U R E W O R K F O R C E W I L L B E C O M P O S E D O F

V A R I O U S E M P L O Y M E N T M O D E L S

Internal Talent

Outsourcing / Talent

Leasing

Human Machine

Interaction

Alliances Network

Freelance / Talent

Platform

Impact on Talent Experience

Career Frameworks

• Shake traditional career

frameworks

Reward Processes

• Flexible and agile

• Benchmark compensation in

real-time

Reward Offerings

• New models

• Tailored to attract, retain and

engage external talent

Talent Experience

• Experiences for all talents

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O R G A N I Z A T I O N S

C H A N G E F R O M A H I E R A R C H I C A L S T R U C T U R E T O W A R D S

A N A G I L E O R G A N I Z A T I O N

• One “internal talent marketplace”

• Driving innovation by fostering agility

Source: Mercer Research 2018, Oliver Wyman 2017


Career Frameworks

• Organization-agnostic Job

Architecture

• Flexible, yet robust Job Structure

Reward Processes

• Dynamic

• Focus on key events

Reward Offerings

• Diverse workforce needs

• Real-time, team-focused and

event-based

Talent Experience

• Limited TR distinctive effects

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I N D I V I D U A L S

M O V I N G F R O M T H E T R A D I T I O N A L E V P T O A T A L E N T

E X P E R I E N C E P R O P O S I T I O N ( T E P )

The Future of Work will see

changing aspirations and

expectations of talents

Jobs are being reconfigured

and a broader skillset will

become critical for success

Jobs will be changing within

the Future of Work, resulting

in a shift in skills and tasks

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I N D I V I D U A L S

MOVING FROM THE TRADITIONAL EVP TO A TALENT EXPERIENCE PROPOSITION (TEP)

C O M P E N S A T I O N B E N E F I T S

C A R E E R S W E L L - B E I N G

P U R P O S E

Create a differentiated experience

• Training and developing when I need it through

relevant platforms

• Help me manage my work-life integration and give me

flexibility

Create staying power through a unique proposition with a

purpose

• Provide me with meaningful and fulfilling work that matters

• Make me contribute to a company that has a positive impact on

society

Provide an offering aligned with the market

and the individual needs

• I can personalize my rewards

• Provide me with a self-service benefits basket

C U L T U R E


Career Frameworks

• Limited TR distinctive effects

Reward Processes

• Extended personalization

Reward Offerings

• Focus stronger on overall well-

being of employees

Talent Experience

• Talent Experience Proposition

• Rewards, culture and meaningful

work for internal & external talent

H O W T O C R E A T E A C O M P E L L I N G E X P E R I E N C E ?

T A R G E T E D : B A S E D O N U N I Q U E N E E D S A N D D E S I R E S

S T AR T E R S L O N G - T E R M

L O Y AL S S T R I V E R S M AN AG E R I AL

C O R E

F R E E

AG E N T S

Provides multiple dynamic lenses to evaluate programs

Builds relevance into all programs to target investments

Foundation for a personalized experience

Sample Personas

Location

demographic

s

Employee

demographics Needs Interests Behaviors

Communicatio

n preferences

C R E A T E A C O M P E L L I N G E X P E R I E N C E

S T A R T E R S : P E R S O N A S I N A C T I O N

Local Foreigner

Male Female

F A M I L Y S I Z E

C A R E E R S T A G E

T AR G E TED AC T I O N S

Offer education subsidies for MBA and relevant courses

Offering to pay for student loan

Flexible working hours such as flexi time

• Focuses on travelling and fun

• Enjoy flexibility in workplace

• Paying off student loan

• Keen on learning and

development opportunities

C H AR AC T E R IST IC S

1 3 5

Junior Senior

Opportunities to work overseas such as international assignments

Male Female


Self-awareness of health and well-being through regular health check up

Educate on retirement through offering financial literacy lessons

• Concerned about health

• Preparing for retirement

• Focuses on spending time

with self and love ones


Local Foreigner


S I L V E R W O R K F O R C E : P E R S O N A S I N A C T I O N

Offer comprehensive and high medical and insurance coverage

Flexible working arrangement such as part time working arrangement

F A M I L Y S I Z E

C A R E E R S T A G E

1 3 5

Junior Senior

• Often left out of office activities

• Does not qualify for statutory retirement

and insurance benefit

• Often not entitled to the same amount of

benefits that other employees are

entitled to


Male Female


G I G W O R K E R S : P E R S O N A S I N A C T I O N

C A R E E R : F R E E L A N C E R

Local Foreigner


Fostering networking opportunities through invitation to broader company activities, for example business and/or organization-wide town halls, company dinner and dance

Cash allowance to compensate for retirement & insurance

Offering voluntary health and wellness benefits such as, providing access to on-site gym, financial literacy talks, wellness events and activities

F A M I L Y S I Z E 1 3 5

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R O L E S A R E E V O L V I N G

INCREASING EMPHASIS ON STRATEGIC PARTNERSHIP TO THE BUSINESS

T R A N S A C T I O N A L A C T I V I T I E S

D E C L I N I N G 1

S T R AT E G I C & A N A LY T I C A L

A C T I V I T I E S 1

• Market pricing using salary

surveys

• Participating in salary surveys

• Administering pay processes

• Establishing or adjusting pay

bands

• Managing AI / Machine Learning

Tools

• Predictive Modeling

• Manager training on pay

conversations

• Transparency

Source: 2018 World @ Work Compensation Function of the Future Study

Organizations are creating reward business partners to upskill managers and strategically

partner with HR & the business

© MERCER 2019 18

E S TA B L I S H E D C O M PA N I E S M A K I N G T H E I R R E WA R D S M O R E A G I L E

COMPANIES REACTING WITH AN EVOLUTIONARY APPROACH TO THE TRENDS

Market Data Analysis

• Microsoft examined market data trends to identify critical roles and areas where most vulnerable employees were

• Action plans were defined where the company needed to invest in order to attract, motivate, engage, and retain talent

Cluster Analysis

• This tech company uses employee data to create insights based on a cluster and turnover analysis

• Derivation of actual employee needs for certain clusters and developing cluster specific packages and communications

Smart Benefits

• Visa offers its employees in Europe their core benefits plus a large employee choice package of up to 1/4 to 1/3 of their total rewards

• The employees can choose cash or benefits from following types: protect, live and save

Flex Credit System for Benefits

• Oracle provides its employees with flexible allocation of credits (“flex points”) across their benefits offerings

• Every employee has a certain budget of flex points to select the suitable packages (e.g. medical waiver credit, dental plan, life insurance and telehealth services)

Data driven segmentation Flexible Offerings (focus still on benefits)

US based tech firm*

Source: Mercer Research

© MERCER 2019 19


Bonus without individual component

• Bosch introduced a global remuneration system to set a stronger focus on longer-term targets

• The variable pay is derived from company and business units targets

New profit participation

• Infineon converted the individual bonus share into the basic salary and the new profit participation

• The new bonus is derived from Return on Capital Employed, Free Cash Flow and the business units result

Online Recognition Point System

• KPMG runs in Canada a program which allows employees at any level to participate and recognize peers for a job well done

• Rewards are points that can be redeem for prizes like Apple iPad or gift certificates

Workplace and Lifestyle as reward

• Leading tech companies focus on competing through holistically promoted EVP

• Providing their employees with perks that optimize their employment experience like unlimited sick leaves, baby cash, bonuses for living within a mile.

Change in Variable Compensation Systems Improving Recognition and Workplaces

E S TA B L I S H E D C O M PA N I E S M A K I N G T H E I R R E WA R D S M O R E A G I L E

COMPANIES REACTING WITH AN EVOLUTIONARY APPROACH TO THE TRENDS

© MERCER 2019 20

S M A L L E R F I R M S H E A D I N G I N T O D I F F E R E N T D I R E C T I O N S

U T I L I Z I N G F L E X I B L E E N V I R O N M E N T S F O R I N N O VAT I O N


Travel Budget

• Airbnb offers new industry-specific benefits to their staff that align with their philosophy

• Employees annually receive $2,000 in open travel budget to use on trips to properties on their website

Holidays Bonus

• FullContact provides a reward of up to $7,500 to each employee for taking time off work

• Requirements are using all vacation days and not writing emails/ taking phone calls during that time

Public compensation

• Buffer publishes the compensation through its buffer salary calculator on the website

• Determinants for compensation include base for the role, location, family, journey, experience

Workplace and Lifestyle as reward

• At elbdudler colleagues collectively set their salaries based on needs, market value, company benchmark and revenue

• All salary decisions are public knowledge within the company

Emerging practices New total rewards cultures

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N E W R E W A R D M O D E L S I N A G I L E W O R K E N V I R O N M E N T

CAREER FRAMEWORKS

• Shift away from the traditional job

descriptions

• Changes in job evaluation and grading

• From a job-based framework to a skill-

based framework

• Horizontal moves and flatter structures in

career frameworks

REWARD OFFERINGS

• New compensation and reward models for

all talent

• Focus on delivering above statutory

benefits for contingent workforce

• Flexible work model – integrating life and

work

• L&D to become key focus (of TR)

REWARD PROCESSES

• Rewards cycles changing to be agile and

adjust quickly to market benchmarks

• Technology-enabled flexible reward

processes

• Team-based reward processes

TALENT EXPERIENCE

• A holistic experience that addresses the

individual needs of all talent

• Purpose-driven work that is aligned with

social and ethical values

• Well-being of talent is to become core

agenda for organizations

© MERCER 2019 22

Documents

NEW REWARD MODELS IN AN AGILE WORK …...their Reward system • With digitalization high on the agenda, 29% of companies are planning change to better support their new company strategy