Alternative Approaches

While competitive base pay may play an important role in recruiting candidates, a new survey shows more companies are planning to boost their reliance on alternative rewards to bolster their offers.

By Kecia Bal

While nine in 10 organizations in a new survey already offer four or more alternative rewards -- offerings such as career-development programs, enhanced capital accumulation programs, gift cards or merchandise programs or community-impact opportunities -- more companies reported they are working to expand their use of alternative rewards, according to a new survey by the Hay Group division of Korn Ferry.

Over the next year, 71 percent of respondents plan to increase their use of alternative rewards, and 69 percent plan to expand their use of alternative rewards at the manager/professional level and below, the Alternative Employee Rewards survey shows. The global people and organizational advisory firm's data stems from responses, primarily from HR, from 242 U.S.-based medium- to large-size organizations.

Investing in rewards beyond paychecks, according to Tom McMullen, rewards practice leader at Korn Ferry Hay Group, represents a method to keep talent interested -- and to get them in the door.

"A competitive cash and benefits programs is key to attract people into an organization; you win that first moment of truth with employees," he says. "But there's a second moment. Why an employee stays is the nonfinancial rewards."

Of those, career development programs were the most oft-cited points for improvements in the survey, with more than half planning an increase in career-development programs across employee levels, the survey says, and that also aligns with the firm's insight on employee perspectives: A Korn Ferry Hay Group global employee opinion database reveals that a lack of career development opportunities is the top reason employees leave.

"This reaffirms what we see from the employee side," McMullen says. "If they're stagnating where they are today, they're going to go find those opportunities somewhere else tomorrow."

Spot cash rewards bonuses are to grow, too, the new survey indicates, as companies emphasize alternative rewards in total employee rewards strategy, with 46 percent of respondents reporting a plan to increase those among manager/professional and clerical/skilled trade levels. bonuses -- anything from $500 to $2,000 (or sometimes gift cards to make them more liquid) -- are geared toward "caught in the act of greatness" moments, McMullen says, providing on-the-spot opportunities to reinforce strategic objectives.

"We're seeing companies earmark a half percent of payroll to a full percent for these," he says. "You're not providing rewards to everybody -- probably a minority. That investment can go a long way."


Loree Griffith, a principal in Mercer's talent business, says increasing interest in alternative rewards is part of the "new deal" for employees.


"Employees are shedding their view of the old deal -- long-term job security, rich and low-cost benefits -- in favor of pay for performance, defined-contribution plans, greater work flexibility and more opportunities for career development," she says. "That could be lateral or cross-functional."


A soon-to-be released study from Mercer highlights the importance of developing career frameworks and paths for employees, Griffith says.


"About 37 percent of responding employers don't have [career frameworks] in place, but are planning to implement them," she says. "They're investing to build up the content and collateral around allowing employees go to a different function or sub-function in their field or even in a different area outside their expertise -- maybe from IT to finance or finance to operations or another business line.


"It's about trying to create energy and excitement among the employee base, a broader value proposition than base pay."


Workplace flexibility is another alternative rewards strategy -- one that often ranks high among employee priorities -- picking up momentum, she says, as well as more out-of-the-box ideas such as community-impact programs. Citigroup's announcement that it will allow some employees to take a year off for charitable pursuits is just one example.

How the programs are presented is key, Griffith says, with effective manager training often serving as the linchpin.

Jane Kwon, total rewards practice leader at Aon Hewitt, says the trends continue in an upcoming Aon Hewitt study of 600 business and HR leaders.

"Career development came out to be one of the top five areas where leaders said they as an organization and employer need to truly differentiate themselves," she says.

Student debt repayment options -- for the employee or for employees' children, so it can target more than one generation -- are another alternative reward possibility [for which interest is] growing, as well as more parental leave, emphasized by the recent announcement of six-weeks paid parental leave for federal employees.

Among clients, Kwon says, the consultancy sees a gap between perceived value of broader rewards and what companies are spending.

One approach to controlling alternative rewards costs -- and one that's worked well in European countries where there are statutory benefits but hasn't been fully proven in the United States -- is the concept of choice: providing a menu of alternative rewards and letting an employee choose which works best for him or her, within a set cost, Kwon says.

"So if the employee is expecting to have a baby in the next year or has some healthcare need, allowing people to be able to choose frees people up," she says. "That's an alternative approach in itself."

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Apr 21, 2016
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