Reimagining your total rewards strategy

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It’s time for a fresh approach to total rewards programs, with the aim of enhancing value and driving business results. This shift emphasizes aligning employee needs with organizational goals, leveraging data, and embracing a holistic approach for optimal impact

WHILE TOTAL rewards optimization isn’t a new topic, it’s an increasingly hot one. Between moving past the pandemic era of putting out fires – a point-solution-based approach of employees are stressed, let’s set up an EAP; they can’t see a doctor, let’s implement a virtual care program – and current HR trends, “There are factors at play that have created a pivotal moment in time,” says Joey Raheb, ASA, chief commercial & broking officer, health solutions, Aon. “It’s never been more important for an organization to take a step back and think about how to get the best bang for their buck, optimize what they’re providing, and achieve the best business results going forward,” he notes. Dominic De Fabrizio, partner and human capital account executive at Aon, agrees, adding that historically companies have struggled to make the connection between optimizing their spend on total rewards and understanding employee needs, while delivering better business outcomes, but the stage is set for change.

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What’s behind the rise of total rewards?

“It’s never been more important for an organization to take a step back and think about how to get the best bang for their buck, optimize what they’re providing, and achieve the best business results going forward”

Joey Raheb, Aon

A top HR trend is finding new ways to improve affordability while maximizing impact. Whether it’s salary, benefits, or retirement savings, there’s a cash outlay, and organizations want to ensure that investment improves business results as well as takes care of people’s needs. As concerns swirl over burnout, work-life balance, cost of living, and retention, a fresh approach is needed.

“People are an organization’s most costly asset, and there’s opportunity here to manage risk associated with them,” Raheb says. “Total rewards touch on all these relevant items.” De Fabrizio is seeing employers shift away from the traditional approach of developing a health plan in isolation of a retirement plan separate from cash compensation. It’s no longer easy to build these things in silos, he notes, and tackling it that way left many organizations in a situation where “the sum of the parts doesn’t equal the whole.” “There’s a lot of overlap between different programs – you have to start to think about how they interact and how they impact the employee. Historically, we’ve helped organizations redesign individual programs, but they’re now looking at us to

help them think about accommodating employees’ preferences and needs from a total rewards perspective.” This makes sense given that people don’t view their relationships with their employers in buckets: there should be a natural flow. It’s why drawing parallels to the Amazon shopping experience where the right thing is surfaced at the right time is so popular, Raheb says. That’s how he explains total rewards optimization to clients, as “bringing some intuitiveness to an organization’s rewards infrastructure.” “For me, it only makes sense to think this way,” Raheb continues. “It’s encouraging to see more clients pay attention to this because it’s what’s going to get at the crux of the issues employers are facing and create that best return for the business.”

First and foremost, employers need to develop an overall strategy comprised of two critical components: a clear employee value proposition and a total rewards philosophy. This is something that requires thoughtfulness, and Raheb warns against rushing the process. “If it takes you an extra six or 12 months to get to the finish line, so be it because these things are important,” he says. “They touch the lives of employees every day. Doing something that doesn’t align – even if you feel you have the right program – can be more detrimental than accretive.” When redesigning or building the best total rewards system possible, there are three main considerations that will help differentiate your organization. First, have a true understanding of employee needs, wants, and preferences. Second, market competitiveness: How do you compete for talent against other organizations and industries? What unique value do you bring? Third is financials, where the focus should be on optimizing spend and making it sustainable into the future. “Bringing those tenets of strategic, competitive, and financial value together builds the roadmap for your total rewards strategy for the next three, five, 10 years down the road,” De Fabrizio says, adding they also encourage organizations to think about how they’re benchmarking the value of their total rewards. In many cases, they might not be considering the value in the most appropriate way – for example, looking at utilization or take-up rates as opposed to business outcomes in terms of performance, turnover, or productivity. “It’s great if people are using the programs, but if it’s not delivering value to the business, and if you can’t use data to determine that value, HR professionals are often up against leaders who only see it as a spend. You’ve got to get more sophisticated about how you articulate value.”

“Leaders are listening – there’s a desire to look at these programs holistically. The need, the technology, and the data and analytics have come together in a perfect storm. It’s an exciting time to be an HR professional and it’s exciting for us at Aon”

Dominic De Fabrizio, Aon

Aon’s Total Rewards Optimization and Conjoint Tool unifies critical information like employee listening, benchmarking or market perspective, and financial modelling but has the capability to get down to an individual level as well. From age bands, roles, and different geographies, to surfacing if/and scenarios that allow you to modify certain aspects of the reward structure, see how employee sentiment would change, and find a win-win for employees and employers, “you can really start to optimize spend within your portfolio,” De Fabrizio says. This is an important point given most programs come in at around 80 percent in terms of spending dollars in the right places, meaning there’s real opportunity to move that needle. It doesn’t happen overnight, but Aon provides a forward-

looking path in the right direction. Ultimately, the differentiator is not the concepts in and of themselves but how Aon brings them all together. “The tool looks at individuals and then rolls it all up into an overarching strategy, guiding principles, and philosophy,” De Fabrizio continues. “And it starts to crack the nut CFOs and COOs are looking for – making sure that if they’re going to invest in employee programs, they’re getting business results from that spend including more engagement and productivity from their workforce.” After years of “yelling from the rooftops the importance of this,” what’s valuable is the ability to sit in front of clients and talk about broader rewards – and know they’re listening. Raheb recently attended a conversation about benefit redesign and the CEO joined, his words reflecting the sea change in the space. “He said, ‘We see benefits as connected to the cultural, pay, and job transformation we’re making,’” Raheb recalls. “‘We may not launch all these programs on the same day, but they play a significant role in our culture, our strategy, and our people’s ability to execute on both those things.’” For Raheb, it was a great moment in his career to hear a senior executive speaking to the opportunity the Aon team has believed in for years but struggled to make real for companies. “Leaders are listening – there’s a desire to look at these programs holistically,” De Fabrizio sums up. “The need, the technology, and the data and analytics have come together in a perfect storm. It’s an exciting time to be an HR professional and it’s exciting for us at Aon.”

Importance of total rewards on the rise

Aon harnesses data for decision making

Published July 29, 2024

Global health trend is at its highest level in 10 years at 2.8% general inflation

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What’s the future of total rewards?

“Nowadays I leave companies with, ‘If you do this right and for the right reasons, you’re going to get real business results from it – it’s the right thing to do for your organization.’”

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50% of employees are actively looking for a new job

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Workers’ financial stress is costing employers 15% of annual salary costs and 30 productive workdays annually

60% of employees are concerned about immediate expenses, work/life balance, and burnout/stress

Human capital risk is a top 4 priority for the C-suite

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