WORKSPAN
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Agile Rewards in a Modern Work Ecosystem

The push-and-pull dynamic between organizations and workers in an era of digital disruption amid a tight labor market is forcing companies to radically rethink their employee value proposition and accompanying rewards and benefits.

With the rapid transformation of work across many different industries and the increasing use of nonemployee labor across a variety of functions, there’s a growing premium placed on an organization’s ability to be agile and rethink work to attract and retain their preferred talent. In today’s world, organizations get to tap varied sources of work, ranging from fulltime employees and freelancers to volunteers to AI and robotics.

At the same time, worker expectations about careers, the work experience and rewards are changing at a time of record low unemployment but stagnant wages. There’s a growing recognition that the notion of a career has changed dramatically. It’s not a job for life that many of today’s workers expect but rather development opportunities that result in career security for life — or a gentle landing after a traditional career. These workers also seek a consumer-grade experience from HR programs similar to what they’ve come to expect from digital innovators such as Amazon and Facebook in their personal lives.

There’s a growing recognition that the notion of a careeer has changed dramatically. It’s not a job for life that many of today’s workers expect ...

These different expectations are giving way to a more individualized definition of work which, in turn, requires new, more agile approaches to the “work deal.” Organizations must move beyond the employee value proposition aimed exclusively at engaging traditional employees to focus on the development of a talent value proposition that considers the needs and preferences of all workers — employees and nonemployees. And it’s essential to understand how rewards and benefits need to evolve to keep up with this shift.

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Talent Networks and the Evolution of Work

To develop this new talent value proposition, it’s important to understand how work is evolving and how talent connects with the organization. Today,organizations can tap into a global talent market to access a variety of talent regardless of location via diverse work arrangements — for example, alliances, talent platforms and free agents. Employment relationships are increasingly shorter in duration and organizations are becoming more permeable as talent floats in and out of the organization. Maintaining good relationships with these workers is critical to the success of the employer, as many progressive HR functions are recognizing.

The 2018 Willis Towers Watson “Future of Work Survey” reflects this shift and reveals that, while organizations expect to reduce the percentage of full-time employees (FTEs), they also anticipate using more non-FTE talent. In the next three years, the percentage of work being done by FTEs is expected to decrease from 83% today to 77%. And while still in the early stages of this shift, organizations expect to see a significant five-fold increase in the work performed by talent on platforms (i.e., online marketplaces for work like Upwork), and a 33% increase in work completed by free-agent workers over this same period.

Moreover, companies are increasingly recognizing that they need to create a talent network so these different pools of workers can engage with the organization in an agile manner when they are needed and on terms that deliver value to both parties. For example, a company may need to ensure its ability to occasionally tap into a group of world-class software engineers who may prefer to work as free agents to develop a unique portfolio of skills and accomplishments. Even though these workers are not employed on a full-time basis, it’s imperative for the company to understand what drives their attraction and engagement because of the value they deliver to the organization.

Progressive CHROs are seeking to orchestrate these networks of talent across the different means of getting work done and transform what in the past may have been regarded as a one-off work transaction into more of a relationship — albeit an episodic one (see Figure 1).

With talent moving in and out of the organization, it becomes important for companies to develop relationships with all key talent — regardless of work arrangement — to ensure that this talent chooses to work for their organization as needed and is committed to its purpose.

The question then becomes: What are the connections between organizations and talent that create unique value and serve as the foundation for the new talent value proposition? In other words, what’s in it for workers as well as the organization? Workers derive value from being able to design their own careers. They seek choice in their assignments, flexible schedules and the opportunity to develop new skills and engage with a variety of organizations that will enhance their résumés. Organizations, for their part, gain competitive advantage by being able to tap into specialized talent pools, diverse skillsets and just-intime staffing that reduces costs and improves speed.

A Differentiated Work Deal

Organizations have much to gain from developing a differentiated value proposition for their entire network of talent — both FTEs and non-FTEs (see Figure 2). Not only will such a deal help manage work more effectively overall, it will engage everyone who represents an organization’s brand and therefore touches its customers, on a deeper level that goes beyond earning a paycheck.

Engaging talent on a deeper level also requires organizations to connect workers to the culture. And a talent value proposition can play a key role in ensuring that all workers are equal in how they connect to each other and the organization, and in how they experience an organization’s culture.

It’s also important to recognize that talent has different seasons. For instance, someone working fulltime may choose to become a free agent because he or she wants more flexibility. Or an exceptional digital designer working on a platform may decide to seek full-time employment for greater stability. An effectivetalent value proposition will engage workers as they move through different types of work arrangements. Such an approach will enable an organization to capture attraction and retention opportunities that often are missed. It also will support succession planning, making the transition from one type of relationship to another as seamless as possible.

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Total Rewards and the Talent Experience

At the heart of the value exchange between workers and the organization is total rewards, which functions as one of four key dimensions of the talent experience:

  • Purpose. Workers seek a strong sense of purpose. They need to understand and support the direction of the organization even if their relationship is intermittent and more irregular than that of a full-time employee.
  • Work. Workers must understand and enjoy their work and have the opportunity to contribute to a thriving organization.
  • People. An organization must have a culture of diversity and inclusion that supports diverse talent across the spectrum of relationships as well as leaders who inspire workers to make a difference.
  • Rewards. Total rewards should be aligned with the other dimensions in a way that motivates workers to contribute to the organization. And rewards encompass more than pay and benefits. When it comes to engaging and rewarding non-FTE talent, sometimesan invitation to a company picnic or access to the company gym enables workers to connect to the broader community and often derive value beyond a paycheck. In other instances — and especially with remote contractors — different rewards could be more relevant, such as an online forum or access to a discount program that is also offered to regular employees.

These four dimensions, which comprise the talent experience, are essential means of engaging an organization’s entire network of talent.

Benefits Strategy and the Talent Experience

In our work, we are seeing organizations embrace a continuum of options for aligning their benefits strategy with their objectives for different talent cohorts (see Figure 3).

For example, for talent that is regarded as a commodity requiring once-and-done connectivity with the organization, a company may choose to provide access to benefi ts but no subsidization. This approach is currently more the exception than the rule. When talent is considered to have a tactical advantage, such as in the case of ad hoc workers with highly sought-after programming skills and with whom the company wants to maintain an ongoing relationship, an organization may opt to provide access to medical and/or voluntary benefits, andconsider subsidizing select benefits. Finally, in situations in which talent has a strategic advantage — for instance, a pharmaceutical company may have a world-class academic contributing to its R&D efforts — the organization will want to create a strong connection with such talent and, therefore, may choose to provide access to medical and voluntary benefits, and to consider select subsidization.

It’s crucial to recognize that the needs of contingent workers differ from those of full-time employees.

The Engagement of Contingent Workers

Organizations are recognizing the need to engage contingent workers through rewards and benefits. Findings from the “Future of Work Survey” reveal that there currently is a strong emphasis on offering learning and development opportunities to contingents, with almost half of organizations (47%) providing these types of programs. In the next three years, nearly half of employers (45%) are considering offering recognition programs to free-agent workers while 41% expect to provide access to health and wellness programs such as gym memberships and fitness consultations. And a significant percentage (36%) are considering offering health and wellness benefits (e.g., sponsor/ access to medical or dental coverages).

While employers may decide to make benefits available to contingent workers for the same reasons they do so for FTEs — to drive productivity and retention, improve financial well-being and reduce absenteeism — it’s crucial to recognize that the needs of contingent workers differ from those of full-time employees. These workers face considerable instability in the following key areas:

  • Income. Given the unpredictable nature of independent work, working contract to contract, contingent workers face financial risk due to variable cash flow.
  • Insurance. Affordable health-care coverage and disability insurance are out of reach for many. According to Stride Health research, independent workers are three times more likely to lack health insurance.
  • Retirement. Because of the lack of retirement savings support, many contingent workers are not saving for retirement. 7.8% of self-employed individuals have contributed to a retirement savings plan compared to 44.9% of workers who are employed primarily on a full-time basis.
  • Tax. Contingent workers face an increased tax burden, effectively saddled with the responsibilities of operating as a business of one, without adequate guidance and support.

Consequently, many organizations that rely on contingent talent are tailoring their talent value propositions to address the pain points of these workers. For example, some organizations are offering access to expense tracking and tax filing support provided by products such as Stride Tax. In 2016, Stride data reported that 80% of contingent workers claimed no business deductions when estimating their income. By comparison, once empowered with tools, individuals using tax support and expense tracking tools from Stride Tax recorded $1.1 billion in deductible expenses in 2017.

In addition, many companies are making it a priority to help contingent workers access affordable healthcare coverage, which is frequently one of their largest expenses, through specialized benefits providers such as Stride Health. Personalized recommendation engines used by these providers can save workers time and money in purchasing health insurance coverage. For example, a contingent worker in the real estate industry was able to lower his cost of coverage by $418 per year with tools from Stride to properly estimate his income and forecast his likely medical expenditures rather than relying solely on premium pricing to determine the right plan.

As organizations expand their talent value proposition to address the needs of contingent workers, it’s crucial that they communicate their initiatives to workers.

Because reskilling is critical to all workers in general — and to non-FTEs, in particular — organizations also are looking for ways to offer educational benefits to all their workers. For instance, Walmart recently partnered with Guild Education to offer its full- and part-time employees debt-free online college degrees. Workers are required to make an annual contribution of $365, or a dollar per day.

As organizations expand their talent value propositions to address the needs of contingent workers, it’s crucial that they communicate their initiatives to workers. Email and text messaging have proven to be some of the most effective channels for engaging contingent talent.

Portable and Voluntary Benefits

Organizations are increasingly offering more choice in benefits to allow workers to personalize their benefits and, by extension, to enhance their value proposition. The area of voluntary benefits presents many opportunities for this type of personalization. Voluntary benefits help to meet the unmet needs of a diverse, multigenerational and multicultural workforce.

Findings from the 2018 Willis Towers Watson “Voluntary Benefits and Services Survey” revealed that almost seven in 10 employers identify voluntary benefits and services as an important component of their employee value proposition and total rewards strategy in the next three to five years, which is twice as many as today.

Employers confirmed that the key reasons for offering voluntary benefits are to enrich their core benefits with more personalized benefits (79%), to appeal to multiple generations in the workforce (76%) and to support employee well-being (74%) (see Figure 4).

The findings show a growing demand for products that can be layered alongside core medical benefits provided through traditional medical coverage or acquired through an exchange or other platforms. And there may be possibilities for some organizations to open their benefits package to nonemployees. Employers and vendors that embrace these opportunities should gain a strategic advantage.

To help support the financial well-being of the workforce, companies are starting to offer student loan repayment programs as well as broader financial well-being programs to protect employee wealth. Additionally, some are beginning to provide a level of subsidization for voluntary benefits in areas such as critical care coverage. Moreover, the research shows that identity theft protection, pet insurance and long-term care insurance are likely to generate the most interest from employers in the next few years.

We expect to see a movement downward in the number of hours employees (full- and part-time) will have to work to qualify for these benefits, in some cases from 30 to 40 hours down to around 18 hours. At the same time, it’s anticipated that there will be an expansion in the type of workers who will have access to these types of programs.

Meeting worker needs to enhance the employee or broader talent value proposition also may involve providing a degree of benefits portability. Medical benefits are generally subject to COBRA, a federal provision that allows most individuals who lose medical coverage because of a loss of a job, to be able to keep that coverage for a period of time. Premiums remain at the group rates but are paid fully by the individual and include a 2% administrative charge. Non-FTEs participating in a group health plan also may qualify for COBRA.

Employers also are showing increased interest in offering many of the portable products that fall under the voluntary benefits umbrella. With group-based products such as critical illness/accident, legal and ID theft insurance, the employer is the master policy holder; rates may change if the employee leaves the employer; and coverage may be subject to time limits. It should be noted that some state insurance departments, which regulate voluntary benefits, restrict the portability of group-based products. With individually owned products such as home/auto and pet insurance, coverages can be moved to direct bill and some are more likely to require underwriting. Some of these portable benefits also can be made available to non-FTEs.

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A Portfolio of Agile Rewards

It’s up to HR organizations and CHROs, specifically, to orchestrate this new work ecosystem and an accompanying talent value proposition tailored to the needs of a workforce that moves in and out of an organization as required. This should include giving all workers the ability to build a portfolio of agile rewards and benefi ts that they can take with them as they transition from one work relationship to another. Such an approach will go a long way toward ensuring the ongoing engagement and well-being of all workers.

Ravin Jesuthasan Ravin Jesuthasan is a managing director and global practice leader at Willis Towers Watson. Connect with him on LinkedIn.

Lydia Jilek Lydia Jilek is a senior consultant at Willis Towers Watson. Connect with her on LinkedIn.

Jamil Poonja Jamil Poonja is director of corporate development at Stride Health. Connect with him on LinkedIn.


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