The many challenges of recent years have required even the most agile organizations to bend farther, pulled by the gravity of historic changes to global health, economic, and talent realities. These adaptations have accelerated the need for leaders to think cross-functionally about integrated solutions and strategies that support organizational agility and stability while addressing both near- and longer-term value creation opportunities.

Alongside inflationary headwinds and economic uncertainty, organizations still face fierce talent retention and capability issues.  The moment requires a renewed focus on connecting an organization’s total rewards strategy with its business purpose, strategy, and People Agenda. In doing so, total rewards framework and policies can re-engage an organization’s workforce with enhanced attention on employee wellbeing, pay equity, inclusion and employee choice.

Change must come
One of the lessons out of this collective reassessment of the world of work is that the status quo of a pre-COVID-19 working world no longer applies to the expectations of most employers and employees. The EY 2022 Work Reimagined Survey reveals 79% of employees, and 83% of employers agree the pandemic prompted a need for broad changes to total rewards policies. More than a third of employees cited an opportunity for better pay as their chief motivator in changing jobs, while also citing wanting better career advancement, wellbeing programs, and flexibility in work location or schedule.

Flexibility in the where, when, and why of work seems to now be a “need-to-have” and “not a nice-to-have” as 80% of employees want to work from home at least two days per week. Just 22% of employers want everyone back in the office five days per week.

Amid a still evident “Great Resignation,” and the fact 43% of employees say they’re likely to leave their employers in the next year, organizations would do well to consider revamping their total rewards frameworks as a foundational way to better address the needs of current and prospective employees, while also supporting organizational agility, talent development and employee wellbeing.

Equity in the pay equation
A full reconsideration of total rewards strategies, frameworks and policies also presents an opportunity for organizations to enhance their pay equity alignment and disclosures, while shoring up their Diversity, Equity & Inclusion (DE&I) reporting systems.

The EY Work Reimagined Survey revealed that 20% of employees identified addressing pay equity as the single most important action a company should take to improve DE&I. Employers agreed on the need for action to improve DE&I, but the largest number of employers (17%) instead cited reviewing hiring criteria, rather than closing existing pay gaps. This as women, on average, earn just 77 cents to every dollar made by a man.  While there are many potential contributing factors to gender pay gaps, typically the greatest disparities are due to outdated pay calibration methodologies and recruiting practices. Leaders will need real-time access to robust reporting systems with advanced data analytics capabilities that can trigger an “early warning system” to identify and mitigate potential unexplained pay gaps early in the process.

The European Union has a draft directive pending from the European Commission (EC) that proposes to give employees the right to comparative pay information for employees who are engaged in the same work, or work of equal value. Under the proposal, employers with at least 250 employees would also need to publish an annual gender pay gap report, with enhanced reporting and compliance requirements for pay gaps greater than 5% that cannot be justified by gender-neutral criteria.

As attention on pay equity intensifies, it may be in the best interest of organizations to bolster their pay data collection, analytics and monitoring frameworks, to not only address instances of pay inequality, but to identify and mitigate root-cause people processes that contributed to the gaps occurring in the first place. Given employee focus on pay equity, DE&I and transparency, pay equality interventions, along with enhanced monitoring and mitigation efforts, can positively impact employee engagement, employee retention levels and organizational health.

Reassess and recommit
Pay has become a chief concern of employees as they consider where they want to work, but also in how the values of an organization are reflected in total rewards.

The combination of pending pay equality legislation, stakeholder focus on pay equity and its alignment with broader sustainability/ESG (Environmental, Social and Governance) initiatives will continue to keep equality as an important component of a company’s C-suite and Board agendas.

Given the organization-wide importance related to this issue, leaders would benefit from proactively assessing and addressing any existing pay inequality issues, making incremental adjustments as needed and implementing guardrails (or early warning systems) within their compensation planning frameworks.

These steps will better align organizations for the business climate at hand, while also reinforcing their commitment to DE&I objectives and showing the value that they place on their employees and communities.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.