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How can employers align their reward strategy and diversity and inclusion policies?

Tuesday January 26, 2021

Need to know:

  • Equality is firmly on the board agenda, with events such as the pandemic and Black Lives Matter forcing organisations to treat employees fairly.
  • Technology can play a key role in driving diversity and inclusion through reward, enabling greater benefit choice and more personalisation of messaging.
  • By highlighting inequalities, the pandemic is expected to act as an accelerant for the diversity and inclusion agenda.

With the pandemic highlighting inequalities among employees, organisations are coming under increasing pressure to treat everyone fairly. Ensuring the reward strategy is aligned with the diversity and inclusion policy can help.

Ruth Thomas, co-founder and senior consultant at Curo Compensation, says: “There’s a lot of focus on how diverse groups such as women and black, Asian and minority ethnic (Bame) people have been affected by the pandemic.

“The growth of the Black Lives Matter movement last year means there’s further pressure on employers to take diversity and inclusion seriously.”

The reward strategy has a key role to play in supporting an employer’s commitment to diversity and inclusion. Where pay and benefits are in line with the diversity and inclusion objectives, it will emphasise the organisation’s commitment. Conversely, any evidence that certain groups of employees are disadvantaged or excluded, and it will rubbish these diversity and inclusion commitments. “The way an organisation treats its staff is really important,” says Gethin Nadin, director of employee wellbeing at Benefex. “An employer should have its diversity and inclusion policy to hand when it does anything, including establishing the reward strategy.”

Getting reward right

Building a reward proposition that aligns with diversity and inclusion requires a deep understanding of the workforce and the benefits the organisation provides. Justine Woolf, director of consulting at Innecto, says data is key. “Employers need an understanding of the employee population, or the one they want to attract, but also insight into each element of the reward strategy. Many benefits were introduced to follow the market but this might not be fair or inclusive.”

It’s also important to consider what fair reward means from a diversity and inclusion perspective. Nadin says this doesn’t necessarily mean treating everyone the same. “Employees face different challenges and some will need more support,” he says. “Consider how the gender and ethnicity pay gaps affect some employees’ retirement benefits. An employer might want to consider targeting more financial education to these groups, or offering them additional funding arrangements.”

Involving employees from different diversity groups helps. Where it’s not possible, Nadin suggests creating personas to represent different groups of employees. “It’s exactly like marketing a product,” he explains. “Employers need to consider what each persona would make of the reward proposition. Is it relevant to them? Can they access it?”

Health and wellbeing is a good example of this. Although propositions will often include fitness campaigns such as step or running challenges, this can exclude employees with disabilities or those with caring commitments who don’t have the time to join in. Understanding the needs of different groups and providing a broad range of benefits can ensure everyone is included.

Flexing the benefits

As well as a broad offering, some elements of benefit design may require review. Tamsin Sridhara, global leader on pay at Willis Towers Watson, recommends checking terminology and the scope of benefits. “Employers should look at areas such as dependant definitions; the triggers for time off; and how medical coverage might support an employee looking to start a family. These can all mean different things to different people.”

Benefits are also evolving to better support organisations’ diversity and inclusion requirements. Examples include trans benefits for the treatment of gender dysphoria, fertility treatment and egg freezing.

Using a flexible benefits platform to provide access to a wide range of products can help but Woolf says communication is essential. “Most employees don’t know what rewards they get so an employer should make sure they communicate with them regularly to ensure they get the most out of the benefits package.”

She recommends two options to improve success. “Line managers have regular contact with employees so it’s sensible to ensure they understand what’s available,” she adds. “Technology can also make it easier, enabling regular and agile communications that are personalised to each employee’s needs.”

Pay fairly

Another key component of the reward strategy is pay, an area where employers are already coming under scrutiny as a result of gender pay gap reporting regulations. Sridhara says robust infrastructure is essential to ensure policies and practices support diversity and inclusion. “Salary structures and job levelling, for similar jobs and roles, make it much easier to have pay equity,” she says.

The need for greater transparency has also driven a shift towards basing pay on skills, as David Wreford, partner at Mercer, explains: “Employers are looking at what skills are required for a particular position and how they can measure them. It’s much more objective and helps to create fairness.”

Organisations are overhauling the way pay decisions are made to mitigate against inequality. For some this has meant a shift from manager discretion to objective guidelines and pay audits, while others have taken more extreme steps. “Some firms have completely banned pay negotiations,” says Wreford. “I’ve also seen more interest in artificial intelligence systems to inform pay decisions. These look at data on pay and performance to drive fairer outcomes.”

Pandemic pay pain

The pandemic created additional challenges for employers already grappling with these issues. “Employers had to respond at pace to keep businesses afloat, implementing pay cuts, freezes and furloughing staff,” says Thomas. “Few had time to consider how these steps would affect their work around diversity and inclusion.”

Many predict that these actions will widen pay gaps, with this supported by research from Citizens Advice, An Unequal Crisis, published in August 2020. This found that 17% of the working-age population was facing redundancy, with parents, carers, disabled people and those who had to shield at least twice as likely to lose their jobs.

Given these warning signs, Woolf recommends that employers continue to monitor the figures. “Organisations need to really understand what’s happening behind the data,” she says. “It’s concerning but we’re also seeing plenty of demand for equal pay audits, which indicates that employers are keen to address pay gaps.”

Different reactions

The diversity and inclusion agenda was also highlighted as a result of Covid-19 affecting some groups more than others. This includes Bame people experiencing higher rates of mortality and morbidity, and women having a greater risk of developing long Covid. As well as the launch of benefits, for instance Healix’s long Covid support package which includes respiratory physiotherapy and complementary therapies, demand for healthcare products such as employee assistance programmes, virtual GP services and life insurance has increased.

Katherine Murray, consultant at Total Reward Group, a Gallagher company, says that where organisations are already more proactive on the diversity and inclusion agenda, they have been able to respond better to these different needs. “I saw clients implement virtual roundtable workshops with employees to understand what they were going through and how they could better support them,” she explains. “This saw some introduce paid leave for those with caring responsibilities. It sends out a very powerful message about the organisation and how it wants to support its people.”

And while there are some signs that the pandemic has set diversity and inclusion back, many believe that its influence will be positive. “By highlighting inequalities, the pandemic has accentuated the need for fair pay and reward,” says Sridhara. “And, with new ways of working emerging, it should be seen as an accelerant for fairness in the long-term.”

Article published in Employee Benefits on 26th January 2021

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