With COVID-19 still in the news, employers are revisiting their total compensation strategy, including benefits, and wondering if they’re still relevant in the current climate. We sat down and had a chat with our managing partner, Judith Mewhort, about how she believes the pandemic will impact employees' needs and wants when it comes to total compensation.
Can you provide an overview of what total compensation is?
Total compensation includes any remuneration that a company pays to its employees. Salary and wages are the most common things people think of, but it includes any form of benefits. Whether that's traditional health benefits, that come with life insurance, disability benefits, extended health coverage and dental, or things like retirement plans and wellness benefits.
It also includes all paid leave: Vacation time, sick time (which is not required currently, but is likely to be in the future), and any kind of personal leave. Some companies also pay for lifestyle benefits such as transit passes or kid’s camps as well as professional development. Finally, it includes perks like having a company car or being allowed to keep the air mile points if your job requires travel. All of these things are compensation.
Why is it important for businesses to be thinking about total compensation instead of purely about the salary and wages of their employees?
There is a desire among employees to have greater life work balance and a trend in all aspects of life for individualized experiences. Employers who are able to create a compensation strategy that recognises these desires will be rewarded. If you can provide some form of flexibility or customization as an employer, you're more likely to get a larger candidate pool; you're more likely to retain your staff; and they’re more likely to be happier and more productive because they feel valued. Anytime an employee feels valued, you as an employer benefit.
However, there is a disconnect. For many employees, when they go to take a job offer, they'll often just compare salary offers. Company Y will pay me $75,000/yr and Company Z will pay me $80,000/yr, so I'm going to take the $80,000/yr job.
However, if Company Y also offers four weeks of vacation, instead of two, that's actually an additional 4% of income. If they give you personal days or flex days, that's additional compensation. If they pay sick time, that's compensation. If their benefits include additional allowances or higher coverage amounts, or they provide some form of savings plans, that all benefits an employee. If job-seekers or your own employees don't understand these points, they’re not really making a realistic comparison. That’s why employers need to communicate this well.
With COVID, people are revisiting their benefits. What are some ways you think COVID is going to change what people are looking for in their total compensation?
Some elements were already starting to come into the consciousness of employers over the last couple of years, but I think COVID accelerated them. The rise of mental health awareness, the desire for more work life balance, and looking to their employer for support and assistance beyond just their work are the big three.
There has recently been a greater emphasis placed on helping employees struggling with mental health issues. Bell's Let's Talk campaign really raised awareness that mental health needs to be talked about and dealt with, not buried under the carpet. And mental health concerns have obviously gone way up since COVID.
Any mental health support that an employer can put in place for their employees and supervisory staff is incredibly important. Ideas like providing increased maximums, online counseling services, and resiliency training are good options. There's a whole variety of new ways to receive coaching and therapy for people struggling with mental health issues.
Beyond mental health, employees are looking to their employers to provide financial guidance. It could be an employer contributing to a retirement plan or a savings plan. It could be an employer establishing payroll deduction plans to help employees save. It could be general education about finances and about financial wellness.
This is one of those areas where there's so much information out there, but many people still don't know how to manage their money. They grew up not being taught by their families or in school. It's all trial and error and sometimes the errors get so big that it's overwhelming, which is why financial health and mental health are inextricably linked
The big overarching theme is that the societal norms that were true a generation or two ago, where family, community, and religion was the bedrock of someone's social circle and support system have been eroded. As families moved farther away, families got smaller and fewer people were attending traditional religious services, people started to look to their employer for help. Covid has accelerated this reliance especially with concerns about returning to the workplace. It is incumbent upon employers to determine what their people need, and to develop a strategy based on data that will support their people and be financially sustainable.
How can employers figure out what their employees actually want?
Collect feedback from frontline supervisors. Employers can do surveys (we've helped clients do these before) and ask their employees what’s important to them.
You can't give everybody everything, but one of the things you need to figure out is how to best spend the pool of money that you have. If you can do that effectively, you're going to have greater productivity and lower turnover, which ultimately saves you money.
The survey can be quick, too. What do you like about our benefits plan? What don't you like? What would you like to have? How important is flex time on a scale of 1 to 10? What does that look like for you? You get the picture.
Recognize that there are differences amongst your employment groups. The traditional idea is the difference between Gen Z, Millennials, and Boomers. But even within those groups, there are differences. Some people have children. Some people have fur babies. Pet insurance could be really important to a significant percentage of your population and a greatly appreciated benefit. But you won't know that unless you ask the question.
So what holds businesses back from asking those questions in your experience?
Bandwidth is often a problem. Small and midsize firms often don't have robust HR departments or HR professionals working within larger organisations may have other duties.
Pre-COVID, we had a very tight employment market and for certain sectors of our economy, we still have a very tight employment market. HR’s focus might be on recruiting and they may not have the ability to focus on this.
Or there’s an “if it ain't broke, don't fix it” attitude. We've noticed over the last several months that COVID has caused people to go, “Oh, maybe we do have to rethink this because while it didn't appear to be broken, it's not really working.” in our new reality.
How do benefits advisors come in here? How do they help with the total compensation packages?
Benefit advisors help on a number of fronts. For starters, though they’re probably not going to be the person that's going to do a salary survey for you, they'll probably know an expert that can.
More directly, benefits advisors usually have large numbers of clients and they can help you benchmark. They can say for an employer of your size, in your industry, in your province or your country, this is what your peer group is doing, and you’re ahead in these areas and you're behind in these areas. That's the first layer of data.
Then they can look at the second layer of data, which is taking a peek at your benefits offerings specifically. Now you're benchmarking not only your health and dental plan, but you can benchmark what you're offering in terms of vacation time, personal leave, and other forms of compensation.
Benefits advisors can also consider your plan’s usage data. They can look and say, these are the benefits that people are using and these are the benefits people aren't using. Then they can ask the question, are employees not using that benefit because of communication or are they not using that because there's really no desire?
For example, if you have a vision care benefit on your plan and nobody uses it, is that because nobody wears eyeglasses or is it because nobody's aware that that benefit exists. If it's the former, why do you have it? If it's the latter, how can we communicate that benefit better?
Then you can dig even deeper, looking for patterns in your claim data. What are the drug spends for? Are the drug spends for depression and anxiety medications? If so, what is our disability claim rate? Are there things that we can be doing to prevent people from feeling so anxious or suffering from depression? Can we implement some form of additional therapies, or can we provide other services to keep people from even getting to that stage? And what would those look like?
That’s the really deep dive, and those are the types of things that a benefits adviser can dig into.