TMT market for people-related rewards, protection and benefits
TMT market for people-related rewards, protection and benefits
As talent-short TMT employers plan for a post-pandemic future, they are placing big bets on their total rewards strategy in order to meet the ongoing challenges related to talent. They have learned amid brutal business conditions that they must invest in and give priority to workforce wellbeing EX, in order to attract and retain talent.
Organizations recognise they must invest in and embrace a more comprehensive view of Total Rewards, recognizing the important role that career growth, retirement plans, company stock and other programs play in meeting their talent attraction and retention objectives. 2021 was another year of change, with tightening labour markets pushing salary increases around the world, including for the tech industry. Our research indicates that 2022 will see salaries and other aspects of life return to some sense of normality and more companies implementing regular salary reviews and higher increases than in 2021. Workers now have some small power due to labour shortages and they are deciding to exercise it.
In an increasingly competitive talent and business landscape, attracting and retaining a leading workforce is our key competitive advantage. Our Total Rewards and talent philosophies work in tandem to create a compelling value proposition. While compensation has historically been the key tool for attracting and retaining workers, we know it is not the most important differentiator; career visibility and growth drive engagement.
Anonymous TMT Executive
As we have discussed earlier in this report, employee reskilling will become a vital feature in managing the workforce of the future. Reskilling is being used by many companies to expand the talent base, sometimes by training non-technical employees to take on digital jobs if they show the interest and aptitude. Successful reskilling approaches use a combination of online and collaborative training and tools supported by active manager mentoring and coaching, especially in a hybrid world. The approach to effective reskilling is a key component in a TMT company’s approach and, if done correctly, will alleviate pressure on the overall cost of cost of employing talent.
According to McKinsey, more companies are building talent internally rather than externally. More than 50% of executives believe developing the skills of their existing workforce is the most useful approach to address capability gaps over hiring new workers, redeploying talent, and contracting in skilled workers.
Investments in the digital transformation must have a digital-first culture as its intended outcome, rather than represent a disconnected collection of technology investments, organizational changes, and a grab for talent. The moving parts must be aligned to achieve optimal business results and constantly fine-tuned to meet new competitors, changing customer needs and the shifting skill sets and expectations of a restless workforce. So, when an organisation seeks clarity around the market for people-related rewards, protection and benefits, they must take a total organisational view.
High-performing organizations are more likely to consider long-term incentives (LTIs) and financial wellbeing programs as core elements of Total Rewards
To understand the factors making up the overall market for skills and talent and how to be successful players, TMT executives recognise they must address more than simply pay and assess their overall approach to their employees. This translates into a review of their overall approach to employees, including a total rewards approach and associated costs. They understand the need to review and compete for talent across wellbeing, benefits, pay and career.
In the remaining parts of this chapter, we will explore a selection of the factors a company must address to ensure an effective access to the global talent pool.
A new compensation framework required
What actions are organizations taking?
In order for a company to be able to compete effectively in the market, WTW recommends a ‘wellbeing diagnostic’ to help employers assess the state of employee wellbeing, benchmark against best-performing companies, and link wellbeing to business outcomes and performance. This approach includes:
Assessment – gather data to understand your current state in terms of measurable outcomes and programs for each pillar of wellbeing: physical, emotional, financial and socialAnalysis – develop an integrated wellbeing benchmarks based on your population data and program inventory benchmarked against best practicesResults – use the results, insights and key findings to inform and shape your wellbeing strategy going forward, including a measurement strategy to highlight how your wellbeing initiatives link to human capital and financial outcomes.
Investing in and executing on an impactful total rewards strategy and design can put you in a position of strength and provide a clear vision of the future. The first step to starting this process is taking an unvarnished look at your company’s existing total rewards strategy and how it aligns to your organization’s strategy and vision of the future, and then designing a compensation program that fits adds materially to the EX.
How do you get the most out of the investments in your people?
Incisive compensation strategy employs a creative, yet disciplined, approach to pay management, aligned to your Total Rewards strategy and talent value proposition, and enables you to attract, retain and engage talent and drive the right behaviours.
Top 5 actions for employers
Digitalization of the workplace continues to accelerate at a rate few organizations anticipated. The disruptions brought about by the global pandemic and other world events are pushing many organizations to recognize the immediate need for digital transformation. This requires a swift yet cohesive data-driven response to upgrade their technology and reimagine their total talent and reward strategies.
Leading TMT companies have a holistic mindset, and they consider total rewards as a core component of the talent value proposition. Organizations are prioritizing these key strategic areas to address changes in business and financial strategies, challenges in workforce attraction and retention, and the increasing focus boards and management are placing on these areas. Based on WTW research, a majority of organizations:
View building new strategies around work and rewards as their most important capability over the next three years
See a need to be more adept at creating a human-centric, holistic and purpose-driven EX over the next three years
Believe building a talent ecosystem encompassing alternative work models will be an important HR capability over the next three years.
Sweeping workplace changes occurred against the backdrop of a tight labor market
Nearly four out of five high-performing organizations have the technological infrastructure necessary to enable flexible work arrangements and are nearly 30% more likely to have monitoring software that measures productivity for employees using flexible work arrangements.
"HR's tools and capabilities need to evolve with new strategies and innovative solutions for designing, organizing and rewarding work for the realities of today and tomorrow", said Mark Reid, WTW Global Work and Rewards Leader, when interview for WTW’s 2022 Global Reimagining Work and Rewards Survey.
Your salary budget - By Callum McRae and Nora O’Donovan – WTW Co-Leads for WTW TMT Compensation Survey.
Facing ongoing change in 2021, TMT organizations around the world were forced to continually adapt and be resilient. Labour market pressures stemming from the pandemic had a significant impact on how organizations finalized their 2022 pay budgets. Focused on tighter labour markets and the need to attract and retain talent, companies saw their salary budgets increase over prior years.
Pressures around attracting and retaining talent will continue in 2022. According to the WTW 2021 Salary Budget Planning Survey, 23% of organizations reported that their 2022 projections are higher now than anticipated earlier in 2021. The most cited reasons for the higher projections were concerns over a tight labour market (63%) and concerns related to cost management, such as inflation or rising cost of supplies (48%).
Attracting or retaining talent with digital skills is the most commonly cited challenge. About half of organizations are also having difficulties with salaried or sales positions. Nearly all employers (93%) around the world are struggling to attract digital talent according to WTW’s 2021 AI and Digital Talent Survey. Additionally, 95% of employers are struggling to retain their digital talent, an increase from 88% in 2020.
To set a clear salary strategy, you need to begin by identifying your compensation plan’s strategic goals, remembering that every organization will have its own set of goals and unique priorities. Then, after establishing your increase budget based on market data intelligence, you must align your priorities to those goals. For example, if one of your goals is to retain critical roles and resolve any possible inequity issues, then your priorities are to adjust any major diversity, equity and inclusion issues using salary budgets – and even some fair pay analytics – and consider in-demand and business-critical talent and what new competitors for that talent may emerge.
Identifying the economic/salary budget relationship
• Salary increase budget: The pool of money an organization pays to increase salaries. The budget focuses on base salary increases, typically including promotions and merit increases. It excludes additional wage components of total rewards, for example bonuses, long-term incentives, health, and wellness benefits. It also includes cost-of-living adjustments.
• Inflation: Typically defined as an annual change in prices for a basket of goods and services. As prices are rising at a rate not seen since the 1980s, the question is whether this will become a permanent fixture post pandemic, or if it will ease as organizations identify ways to produce and transport what people want to buy. Wages don’t decrease when inflation lowers, so organizations need to be careful in assuming that if inflation jumps salaries should follow. Inflation causes a loss in consumers’ purchasing power as prices go up.
And organizations increase wages only to the extent that the value of what employees produce increases – either because employees are producing more or because inflation is leading to an increase in demand for goods and services. Conversely, an increase in wages can drive costs that companies may pass on through higher prices, which can fuel an inflationary spiral like the one that occurred in the 1970s.
• Labour market shortage: Created when there are more job openings than people with the skills required to fill them. Labour shortages can be general, as when a significant number of people have left the workforce, whether due to retirement, safety concerns, new choices/career changes or simply opting out. This has occurred in the US recently. Or it can be specific to certain positions, as may happen when the demand for certain skills increases faster than the supply of employees with those skills. This can be seen over the longer term, for employees with digital skills. Regardless of the reasons, salaries are being driven up as organizations are forced to compete for talent – whether that means attracting or retaining the people they need – often against new competitors for that talent.
Looking at 2022, greater scrutiny on the labour market will continue among both employers and employees. Results from our latest Salary Budget Planning Survey show that the high-tech industry maintains the strongest average 2022 salary budget projections with above-market increases: Fintech is at 3.9%, software products and services at 3.9%, semiconductors at 3.7%, and electronics and electrical and scientific equipment at 3.7%.
When it comes to salary budgets, be ready for anything
Resilience tempered with cautious optimism will be the 2022 mantra for employers, with most looking to increase salaries and provide bonuses for employees, particularly for critical or high-performing talent. Being adaptable to ongoing market-condition changes is never easy, but indications show employers are returning to a more-normal salary review cycle in 2022. They also are looking at how to focus their salary budgets for the greatest impact, with 2022 projections showing 96% of companies globally will increase salaries and far fewer will implement salary freezes than in 2021 or 2020.
As skills continue to change and skill gaps persist, organizations are investing in and building talent ecosystems and alternative work models. Technology and analytics will play a key enabling role for skills-based work strategies. Having said that, our research also tells us that even among high-performing organizations, fewer than a third are effective at using technology or analytics to track and measure skills of existing employees in the organization or the skills required to get work done.
Our Benefit Trends Survey 2021 examines the future direction of an organisation’s benefits strategy, including a focus on EX, digital health delivery, and trends in benefits design, financing, administration, and analytics. The 2021 survey was conducted with more than 3,642 companies covering 14 million employees. It gives invaluable insights into:
The effectiveness of your overall benefits strategy, from design to administration
Short and long-term actions you can take to modernize key programs
How to design benefits to enhance the EX
Emerging trends in technology, behavioural science and benefits communication and delivery.
The Benefit Trends Survey 2021 found 72% of employers globally plan to differentiate their benefit offerings by, among other things, addressing the specific needs of employees over the next two years. This represents a significant shift as only 23% have such a differentiation strategy in place today.
The toll of remote working and other pandemic-related disruptions have contributed to employee burnout, stress, and mental health issues that have had enormous impact on employee wellbeing. At the same time, from a human resource perspective, business leaders are wrestling with growing focus on DEI, and global skill shortages.
Benefits financing and multinational pooling By Mark Cook - Senior Director at Willis Towers Watson.
More and more companies are taking a proactive approach to financing employee benefits at a global level. Actively managed multinational pooling, global underwriting and captive financing approaches yield significant financial savings opportunities. They also support broader HR initiatives and, ultimately, bring more value to employees. With all the challenges businesses have faced since the onset of the pandemic in 2020, we are seeing an increasing number of multinational companies using these approaches to bring as much value as possible to their businesses and employees.
A key component of implementing an optimized global employee benefits financing strategy is selecting the right global insurers to best meet the needs of your business. WTW's 2022 global benefits financing matrix provides a complete listing of the eight global benefits networks and their affiliated insurers across 212 territories, with full details of the offshore (third-country national or expat) capabilities for each.
Key developments seen among the global benefits networks during 2021 included the following:
The number of local insurer partnerships across all networks reduced slightly, although this was driven mainly by the termination of some regional relationships for some networks in the Africa region.
Most networks continue to look to form new partnerships in countries of strategic interest, where they currently have gaps.
A number of the networks have continued to experience material growth in global underwriting and captive programs. Use of multinational pooling remains stable.
There’s continued focus on developing solutions that align with the needs of a changing environment such as:
A well executed financing strategy can enhance employee benefits across five dimensions
An increasingly popular and effective approach is to deploy digital technology to optimize benefit programs. (Find more details in the WTW webcast, HR Technology of the Future. ) Technology permits an unprecedented degree of benefit customization or personalization. In our survey, 74% of employers plan to have an enhanced digital strategy in place over the next two years.
Mindful of having to achieve these objectives within certain constraints, about half of our respondents (51%) plan to optimize cost and risk management, and more than 44% plan to improve program efficiency.
Cost is arguably of greatest concern in the U.S. and other countries that require companies to shoulder the primary burden for employee healthcare. For example, Kaiser Family Foundation, in its 2021 health benefits survey, found annual premiums for U.S. employer-sponsored family health coverage reached $21,342 that year, with companies contributing about three-quarters of this.
Kaiser also said family premiums for employer-sponsored health insurance increased 47% over the last decade, more than wages at 31% and inflation which was at 19% in the period. The pace slowed in 2021, likely due to the impact of the pandemic, as many expensive medical procedures were deferred. While health insurance is just one component of a benefit program, it’s illustrative of the complexity involved in managing costs while offering benefits that avoid the risk of losing the right talent.
“While talent loss is a major risk, benefit plan and risk managers must identify and manage liability risks embedded throughout employee benefit programs. These exposures will be magnified, and possibly harder to detect and monitor, as benefit and wellness programs expand,” according to Fredrik Motzfeldt, head of WTW’s regional TMT industry group in the UK.
Motzfeldt notes employee benefits liability coverage, often an endorsement to a general liability policy, may require a fresh look at benefit and wellness plan evolve. Employees will need to stay on top of enrolment plans, record maintenance and the whole process of ensuring employees understand their benefits – not just group life and health, for example, but new or changing risks around mental health, privacy and other exposures exacerbated by the pandemic, digital transformation, and other workplace pressures.
For example, Swiss Re, in its Insurance market outlook2022/23 (sigma, No. 5, 2021, Page 24), points to, “increasing inequality risks exacerbating social inflation.” The reinsurer suggests the pandemic has disproportionally affected some lower-income segments and is likely to worsen inequality. U.S. insurers, in particular, face rising claims costs from litigation case awards, according to Swiss Re.
Gartner also indicates one of every four companies can passively trace and monitor employees yet haven’t always found how to balance employee privacy with the technology, raising another potential legal or regulatory exposure. The company defines non-traditional monitoring as including email and messaging text analysis, gathering biometric data and understanding workspace utilization.
You can find a deeper discussion of TMT in the Future of Insurance Vulnerability and the State of the TMT Insurance Market 2021 sections of Risks on the Horizon, our TMT Futures Report 2021.
Conclusion
Pressures around attracting and retaining talent will continue in 2022 and organizations must take actions to address the specific change priorities that have created either disruptive challenges or new career growth opportunities. Employers are defining careers anew to address supply chain disruptions, emphasizing multi-skilling, and increasing focus on employee wellbeing.
Our research also leads us to conclude TMT Leadership and HR capabilities need to evolve to address the here and now opportunities and challenges. Setting new strategies and solutions is all about unleashing the performance of people by:
Pushing boundaries to power organizational agility – the HR leader plays an important role in enabling agility in the broader organization as well as the HR function. To do so, however, requires agility on the part of the HR executive who must serve as architect of new and enhanced business initiatives essential to the organization’s future, while continuing to support HR’s vital operational activities.Unleashing digitalization – CPOs must develop the digital business acumen to understand how technical skills fit into the workplace and how to make best use of people as organizations implement digital technologies to unlock greater business value.Embracing perpetual work reinvention – as technology gives rise to new ways of working and new work options that may include automation, work itself will be continuously reinvented. It is the CPO who orchestrates the many emerging options for getting work done and determines how to best combine human talent and automation. To keep up with perpetual work reinvention and changing skill requirements, the HR leader must make continuous learning and reskilling a core component of the new employment deal.Rethinking culture and leadership – attracting and engaging a global, multigenerational workforce that may include free agents and alliance partners requires an inclusive culture that extends beyond traditional organizational borders, so all talent feels vested in a common mission and purpose. As a result, HR executives must be able to lead people in nonhierarchical, fluid work environments and empower talent on the front lines to drive problem solving and innovation.Elevating HR decision science – from predicting talent shortages enhancing the talent experience to making better business cases in the boardroom, decision science and analytics enable HR leaders to progress from anecdotal to evidence-based thinking which is critical to having impact as business executives.
Investing in enabling the organization will be essential here. As we have alluded to earlier in this report, our Global Reimagining Work and Rewards Survey 2022 suggests nearly four out of five high-performing organizations have the technological infrastructure necessary to enable flexible work arrangements.
This call to action represents an opportunity for HR leaders to chart a new path forward as they prioritize growth opportunities and prepare to lead the business in the future. In a constantly evolving workplace, the role of the CPO is to imagine, invent and ignite the change to ensure the ongoing relevance of its talent and forward-looking work strategies essential to an organization’s future business success.
Organizations have specific priorities to address when optimizing work and job design
As work is changing, fewer than half of respondents in our 2021/22 Global Reimagining Work and Rewards Survey think their current job architecture and job-levelling process support developing a flexible and agile workforce. With this in mind, our research also tells us it will be essential companies reset their total rewards strategy, and to ensure a compelling EX to effectively respond to the pressures around attracting and retaining talent by:
Building an ongoing measurement strategy to understand market competitiveness and success of programs in meeting goals
Making effective trade-offs between design and cost optimization, acknowledging the new hybrid work environment
Creating a road map to drive environmental, social and governance (ESG) and DEI goals through Total Rewards
Increasing the prominence of wellbeing within the total rewards strategy to drive organizational resilience.
Considering how the organization's philosophy on career growth is changing and set an overarching career enablement strategy in line with the total rewards strategy.
