Companies are increasingly turning to personalisation to keep up with workforce changes and deliver value to their employees.
- Personalising employee benefits can help meet the diverse needs of today’s modern workforce, while also controlling costs.
- There are five steps that can help a company on its journey to make total rewards more customisable and relevant to all employees.
- Start by using meaningful data to develop an evergreen EVP that is the foundation for personalisation.
Work is changing and has been for a while. How we work, when we work and where we work have all been evolving for several years. As employees also now focus on why we work, organisations need to develop clear and compelling reasons to work for them.
More and more, people are serious about working with purpose. For example, one client recently reported that its turnover among new hires averaged 60 percent after six months. The company was good at attracting talent with competitive compensation, but fell short of fostering an environment that made people want to stay. This reality should be a wake-up call for companies. The employee value proposition (EVP) must be holistic and meaningful, catered to the needs and experiences of all employees.
Different Demographics Have Different Expectations
A five-generation workforce was always going to be a challenge, as the Baby Boomers delayed retirement long enough for Generation Z to enter the workforce. Each generation has its own distinct values and needs that go beyond usual age-related differences.
On top of multigenerational differences, the wider adoption of hybrid and remote work (just over 40 percent of full-time employees work either fully remote or hybrid) meant that companies could recruit from a broader pool of workers. It also proved that work and life were not separate spheres to balance, so flexibility would be crucial going forward.
The workforce is also more geographically diverse than before, as nearly one in ten workers left more expensive cities during the pandemic. This presents further challenges when it comes to meeting the diverse needs of the workforce and controlling costs. Taking a personalised approach to an organisation’s EVP can help achieve this balance.
Balancing Investment and Cost
Getting personalisation right can be challenging. Organisations are constrained by what they can afford. And there are several pressures on costs, including:
- The “100 Year Life” phenomenon. People are living longer and will need more retirement savings than previously. Conversely, some workers will want or need to work longer, and companies should plan their benefits accordingly.
- Pay compression. When organisations use higher salaries to bring in new hires without adjusting the compensation of existing employees, it can create or exacerbate a number of internal issues including pay equity.
- Pressure to optimise spend. There is an increased push for companies to spend on benefits without cutting what matters to employees.
- Driving goals. Ensuring that benefits and rewards help drive the company’s goals around diversity, equity, inclusion and belonging (DEI&B) is important.
While all these challenges are significant, for companies that intelligently deploy data and keep an eye on the balance between complexity (e.g., enough options to make them meaningful) and practicality (e.g., a manageable number of programs), personalisation is feasible and effective.
Typical considerations — cash, stock, insurance, retirement savings — are a big part of personalising total rewards. But so is job design, upskilling, flexible working hours, remote or hybrid work and paid time off.
Living Longer Presents a Challenge to Financial Wellbeing
Life expectancy continues to increase in most of the world. While usually thought of as a healthcare story, it is also a work story. If people live into their 80s, 90s and beyond, are they still retiring at age 65? That’s a long time to live off a pension or the retirement savings they’ve built. It also has consequences for pension systems and their long-term viability.
Employers need to look further down the road. Financial wellbeing isn’t just about retirement savings; it’s about the whole of an employee’s financial situation. Building financial wellbeing is about meeting employees where they are and tailoring benefits to their situation.
There has historically been a mismatch between what employers provide in terms of financial wellbeing and their employees’ perceived needs. For example, financial wellbeing programs often focus on retirement savings, while many employees are more concerned with paying off debt or living paycheck to paycheck.
Addressing financial wellbeing is an area where companies can make a real difference to employees’ lives and futures by helping them navigate the process and educate them as to what support is available.
Five Steps to Implement Data-Led Personalisation
1. Build personas informed by data. To build an evergreen EVP, first look at the workforce. Finding out who they are and what they care about will inform decisions to help meet their needs. But without looking at each employee individually, some degree of segmentation will be required to understand their common needs and desires.
A persona is a descriptive category that fits a reasonable fraction of the workforce, with enough shared traits to be meaningful. Personas start with a core data set of shared characteristics.
2. Develop an evergreen EVP. Use personas, collected data about existing programs and benchmarking to establish an evergreen EVP. An evergreen EVP is the concept of reinventing employee offerings on an ongoing basis. It both tracks and uses data over time and adjusts and tailors the proposition based on that data. Then look at benefits through the lens of a flexible EVP, keeping personas in mind.
For example, consider remote work versus hybrid work. It can be an emotional issue, as many employees have noticed improved wellbeing since receiving more flexibility in where and how they work. A company that leans too hard on a mandated return to office risks alienating or losing employees. An evergreen EVP takes into account other factors, giving companies a better idea of what levers they can use to meet their business needs without risking their employees.
3. Align benefits and rewards. Programs should be adjusted to reflect the evergreen EVP so that what is offered matches the employer’s culture and mission. The EVP must be authentic and help meet the organisation’s commitments to DEI&B. It can’t be just words.
Build a foundation by asking the following questions:
- What do our employees want?
- How do their preferences differ by employee segments?
- How can we optimise the spend we have on rewards?
- What role do benefits and rewards play in our EVP?
- Do our offerings allow us to meet business needs?
The tools a company chooses and how they implement them is also crucial. The best use of benefit technology leverages predictive analytics and generative artificial intelligence to simplify choices, drive value and optimise benefit spend.
4. Target communication. It won’t be possible to calibrate benefits and rewards to each individual. But it can be effective to communicate to distinct groups of employees in a more targeted manner. Rather than blasting out information about benefits to all employees at once, targeted communications highlighting specific benefits to the groups most likely to use them can let employees know that their voice is heard. Additionally, the method and style of communication can be personalised to meet employees where they are.
Companies have been personalising benefits recently through flexible benefits. Giving employees a choice in benefit selection enables employers to support the differing wants and needs of employees, resulting in greater personalisation.
5. Review EVP performance. Ongoing data analysis can help support an evergreen EVP. Personalising benefits and rewards is not a one-time action. We recommend building processes into a firm’s HR calendar to ensure nothing falls through the cracks. This might include:
- Conducting an annual pay equity audit to ensure fair pay processes.
- Looking at employee engagement on total rewards through pulse surveys.
- Analysing benefits uptake and time off to understand which benefits are most valuable to employees. It’s important to note that low use may not reflect a lack of interest, but rather indicate whether a benefit is encouraged or discouraged.
- Using this type of data to revisit the company’s evergreen EVP on a regular basis.
Q&A With Aon’s John McLaughlin and Dr. Avneet Kaur
Q: What are some of the factors driving more personalisation of total rewards?
John McLaughlin: There are many, but one is what is often referred to as the ‘100-year life.’ As people live longer and work longer, employers need to consider new ways to show up for their employees and how to support them in different stages of life.
Dr. Avneet Kaur: Post pandemic we know people are asking for better work/life balance and looking for purpose in what they do. The challenge is when people’s expectations have changed, but what the employer offers hasn’t. Some of our clients are finding this in their attrition rates. They can attract talent with a high compensation package but, six months in, they leave after they realize this is not the organisational experience they wanted.
Q: How are we seeing companies avoid this situation?
John: It comes back to the need for employers to develop an evergreen EVP, which is flexible and considers the different needs of today’s diverse workforce. We know disruptive and unpredictable events can happen; an evergreen EVP allows an organisation to pull certain levers to ensure the employee experience continues to resonate with every segment of the workforce amid volatility.
Q: Shifting from theoretical to practical, what would an evergreen EVP include?
Avneet: On the health side, we help our clients give employees a choice with their benefits where possible. So, for example, you have a tool like Aon’s The Benefits Solution, which is customisable and unique to each employee. It shows employees what their total rewards are, what benefits they can choose from, the types of available retirement and financial wellbeing services based on their individual needs and so on.
John: In an ideal world, I think everybody can have a fully personalized EVP, but that is not practical right now. So, we need to find different types of common denominators. One way is through using data-led employee segmentation where customising total rewards is more easily executed. At the end of the day, an organisation must find a balance on what is feasible and cost effective.
Q: How do you measure how well your EVP is working?
John: The EVP is a living and breathing document that HR leaders must continually update. The same can be said for your workforce, which is also fluid — both in terms of people coming and going and what they are looking for in different stages of their career and life.
Avneet: And communication plays a big role here, too. Sometimes it’s not about changing the types of total rewards offered; it’s how you communicate which ones are available and how employees can access them. For example, how do you ensure employees with parental responsibilities know what childcare benefits are available, or employees that commute to the office are aware of commuter benefits. The list goes on.