The pace of life means that we don’t often get the opportunity to stand back and examine whether our reward practice is fit for purpose or aligned to our aspirations. Instead, more often than not we manage various strands of reward like single layer plastics, whether we are following legislation on gender pay reporting or conducting our annual benchmarking projects. But if we want to create a true responsible reward proposition, we need to demonstrate not just that we say we are doing the right thing, we need to show it. Events over the last 12 months, including the impact of the pandemic and tragic events leading to the impetus of the Black Lives Matter movement means that the Social in ESG has come to the fore. As we lead into 2021, you should consider a renewed focus on your reward strategy – looking with a fresh lens at how you make sure your reward is better aligned to the needs of your employees, your business and the wider society you operate in. 

This brings me to one of my first essentials - transparency. Most reward strategies will say ‘we want to open and clear so employees understand what they are paid and why’, yet if you ask employees, most will say they have no idea how pay works in their organisation. The same goes for Executives – there is a reason why the UK corporate governance code suggests ‘simplicity and clarity’ as core factors when designing remuneration. If you don’t understand how reward works, you are less likely to trust pay decisions and more likely to have a biased perception around pay fairness. A Payscale study showed that 80% of people surveyed who where paid above market thought they were paid at market or below, demonstrating a missed opportunity and potentially waste of money. You don’t have to go to Buffer levels of openness, sharing how everybody is paid, but as they demonstrated when the implemented their transparent pay process, by educating employees on the process and the various elements that determine their compensation, their managers reported having more meaningful and effective compensation conversations, and as a result, employee trust, engagement and retention remain above average. Evolving reward transparency can start with small things like educating employees on the rationale behind your approach to help manage expectations and create a sense of openness, or enabling access to market data. Using technology to engage managers and share benchmark information to inform reward decisions can empower them with perspective to see how their recommendations compare, and provides a foundation for conversations with their employees. 

My next essential element of a responsible reward strategy considers alignment to purpose, values and community. The role of company purpose has never been more relevant considering events of the last year, and ensuring that is translated into your reward related practice is key. This is where authenticity comes into play and whilst we’ve seen many organisations voluntarily paying back furlough money when they have benefitted from the pandemic, others have made very public u-turns and bowed to pressure and reduced profit share payouts to not be seen to use government assistance to supplement the packages of senior leaders. Increased scrutiny has forced many organisations to strongly reconsider actions and practices around reward, learning from others who remain true to their purpose. The way you recognise and reward your employees therefore needs to fit with the kind of organisation you aspire to be – this might mean you need to step back and evaluate what messages your current offer sends and if it aligns with your aspirations. This is especially relevant when considering elements such as recognition and benefits, looking at how the total reward package is brought together so it feels aligned to your brand, ensuring it is targeted and resonates with your employees, so it feels more like a fully connected, complete proposition reflective of your organisational values and ethos.

My third essential element builds on the magnification we’ve seen over the last year on diversity and inclusion, following the prominence of the black lives matter movement and the disproportionate impact of COVID-19 on key workers and those from BAME backgrounds. There is mounting evidence that more diverse organisations are more profitable and successful, and we are now seeing investor bodies telling listed organisations they will vote against them if they do not see evidence of more diverse boardrooms. But if you want to create a responsible reward strategy, you shouldn’t be waiting to be pushed – you need to go beyond words and demonstrate what you are doing to improve EDI. 
Whilst we’ve seen more and more organisations taking proactive steps - for example, deciding to start to publish their ethnicity pay gaps ahead of any regulatory requirement - far more needs to be done to ensure that reward practices are more fair, more inclusive and better suited to the whole workforce. We’ve seen several organisations start this journey by undertaking equal pay audits. One of the biggest challenges they are finding is that they simply do not have enough data to understand how people identify themselves. For example, very few organisations capture disability or sexual orientation, so how can you demonstrate that that you are a more diverse and inclusive organisation when you don’t know how diverse (or not) you are to start with? This is not about meeting targets or tokenism – you need to really be clear on why EDI is important for your business, and in assessing current state you can set out appropriate plans and goals. 

All good reward strategies should clearly define the principles and basis for the total reward deal on offer – a good responsible reward strategy takes it up a notch, so instead of stating ‘we pay fairly’ or ‘we pay in line with the market’ be more explicit and explain what this actually means, evidencing it and monitoring progress. Now is a fantastic opportunity to move beyond bland, generic statements to create a reward strategy that truly fits with your direction of travel, one that feels authentic and puts the Social in ESG at its heart. 
 

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