Modernizing Total Rewards Programs to Attract, Retain Talent

The labor market has shifted dramatically and, in many ways, is more competitive than ever.

Low unemployment and decreasing labor force participation has caused high vacancy rates and increased the time to fill open positions. It’s also pressured employers to increase compensation and enhance their total rewards packages to keep up with changing employee expectations.

These market dynamics mean banks need to review their total rewards package. You may find your bank’s people strategy, and current and future workforce, have evolved beyond the total rewards offerings. You might be investing in benefits and programs that aren’t valuable to employees.

Here are three top total rewards trends to consider for your bank.

Compensation
For most companies right now, compensation increases budgets that are already falling short due to rapidly rising inflation. Employers are frustrated that they are stretching budgets and profitability by spending more on wages, without necessarily seeing an increase in their ability to attract and retain. Employees are frustrated that their wage increases aren’t keeping pace with inflation; their personal budgets are stretching, particularly at entry-level positions.

In addition, certain specialized and high demand jobs that can be performed remotely — especially in areas such as technology and cybersecurity— means banks are facing competition from local, national and international companies.

Here are ways to succeed in compensation:

• Short-term incentive programs: Are there ways to enhance your short-term or annual incentive programs? Currently, nearly 91% of employees receive some sort of variable pay, according to Willis Towers Watson’s 2020 US Annual Incentive Plan Design Survey. Increasing the eligibility to additional groups can make the total compensation package more attractive and competitive, as long as it is clearly communicated and understood. Consider accelerating the payouts to semi-annually or quarterly, so employees receive the value more frequently than once a year.
• Long-term incentive programs: Traditional long-term incentive plans are simply a compensation arrangement with a delayed timing element. While simple to administer, they can lack flexibility that connects employees to the benefits, which creates true retention.

A nonqualified retention program, or sometimes called a SERP (supplemental employee retirement plan) offers the additional benefits of investment discretion, where employees may self-direct their unvested balances across a 401(k)-type menu of funds. SERPs also offer distribution and taxation discretion that allows employees to control the timing of the distribution of benefits. Employers can give employees the opportunity to re-defer their benefits, keeping them invested in a tax-deferred vehicle after they’ve vested. Additionally, a nonqualified program allows plan sponsors a great dealof flexibility when it comes to vesting schedules. Participants can customize schedules and contribution occurrences to fit the organization’s objectives.

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