Rethinking compensation for a new work environment
By Leong Chee Tung, CEO of EngageRocket
This is an important quarter for employers in Singapore. On the one hand, there is the promise of the upcoming rebound, which will inevitably transform employee expectations.
On the other hand, Chinese New Year has its own impacts on employment patterns and employee loyalty. Companies must tread carefully to foster engagement during this crucial time, setting the foundations for the complex period of recovery that lies ahead.
Restructuring compensation packages
There are two reasons to restructure compensation in 2021 – a faster pace of change as well as constrained resources.
Firstly, companies are under pressure to rebuild as fast as possible and regain pre-pandemic levels of business outcomes. This means that the lead times for your average employee’s performance are shrinking. The usual practice of setting long-term, annual goals with a substantial bonus quotient no longer applies.
Team leaders and management are likely to check-in at more regular intervals, making it important to set short-term goals with bite-sized incentives. These incentives could range from WFH-specific perks to customised rewards, all contributing to the total compensation package.
Secondly, employers are currently facing a resource constraint. Early on, in August of last year, a Gartner survey found that most organisations were reducing their merit and long-term/short-term incentives budgets, or keeping them unchanged in 2021. Only 2% planned on increasing budgets. Therefore, when forced to do more with less, companies must restructure compensation packages from a total rewards vantage point.
A total rewards approach – packing in salary, benefits, rewards/recognition, and career development into a single compensation value – balances the needs of the employee with the unprecedented challenges of the pandemic.
In a survey by EngageRocket, over 80% of Singapore employees said that they would like to WFH at least 50% of the time even after the pandemic. Your total rewards plan could include rewards and employee benefits associated with WFH so that it resonates with employees while also offsetting the necessarily muted nature of bonuses this year.
For example, you could co-share employee expenses arising from WFH such as hardware equipment, connectivity costs, power bills, and co-working space subscriptions for employees without adequate WFH space.
It is also important to remember to pivot performance evaluation for WFH. In addition to usual measures of productivity like outcome volumes or fiscal value generation, milestones like teamwork, proactiveness, and helpfulness should also factor-in when you assess an employee for 2021 compensation.
It is only by combining contextualised performance measures with a contextualised compensation structure that you can balance the needs of the business with employee wellbeing.
Compensation in light of the Lunar New Year season
While it is a good sign that the Singapore unemployment rate has fallen for 2 months in a row to December, the resident unemployment rate is still about 1.7 percentage points higher than the year before. The increase seems driven heavily by the sectors most affected by the pandemic: aviation, tourism, retail, hospitality, entertainment, food and beverage, marine and offshore, and construction.
The usual “ang pow” exodus – or the phenomenon of employees choosing to leave a company after they receive a bonus payout – tends to afflict other sectors besides these. There are two factors that have suggested that this phenomenon will continue this year.
First, a K-shaped recovery is expected to occur in 2021. This means that sectors less affected by the pandemic may actually see a fiercer war for talent. There may be an increased desire for mobility post-Lunar New Year once bonuses have been paid out.
Secondly, the Job Support Scheme is ending this March (which has since been extended by six months) Hence, employees in the pandemic-affected sectors affected may take pre-emptive action and search for new jobs, especially if they lack confidence in the financial future of their companies.
All of this points to one direction – leaders and organisations need to make dedicated effort to invest in retaining, motivating, and optimising their existing workforce to prevent a talent gap that will be increasingly tough to fill this year, especially in sectors that are less affected by the pandemic.
Recommendations for companies
Restructuring compensation and performance evaluations around a shorter calendar with more regular milestones are step one. Next, companies must work hard to listen to employee sentiment, which could be changing faster than you think.
Compensation models, incentives, and behavioural motivators must be linked to recent employee experience data to be really effective. A seemingly small but significant measure like having your leadership (virtually) sit down with the team every Monday can do wonders for productivity and loyalty at low costs.
Being transparent about what to expect and what is on offer can alleviate anxieties and fears that frequently lead to preemptive attrition.
However, in order to gain from these opportunities, it is important to assess employee engagement levels at regular intervals, keep an eye out for warning signs, update your indicators for the new normal, and make data-driven decisions to inform your HR strategy.