Alongside Hydro One Ltd.’s initial public offering in November 2015, the company underwent an internal transformation by revamping its total rewards program.
Previously, the utility organization’s program was very traditional with a fixed salary structure and not much external benchmarking, according to Sabrin Lila, Hydro One’s director of compensation and human resources analytics, noting the company was limited by existing policies on what it could do.
“When we did our initial public offering in 2015, we asked ourselves what is going to be a major differentiator for us as a culture?” said Lila during a session at Benefits Canada’s 2019 Benefits and Pensions Summit in Toronto on April 17. “As we thought about that, we came to the conclusion that a big piece needs to be, how do we create a pay-for-performance culture that rewards people for their accomplishments?”
Following the IPO, Hydro One implemented changes to its short-term incentives program and an employee share ownership program. It also amped up its efforts to explain what the changes would mean for its 8,000 employees and how they could benefit from them.
In addition, the organization wrapped its wellness initiatives into its benefits package and is working on changes to make its benefits program flexible. Lila said those changes could include allowing employees to select more vacation time if it was important to them, supporting employees’ education to help them advance in their career and offering career advice to encourage them to move up or laterally within the organization.
“We live in this world of two per cent salary increases. It’s not really that exciting when you get that on an annual basis,” she said. “So how do we create [a total rewards program] in a way that’s going to be more meaningful for someone?”
A combination of changing workforce demographics and the need for employers to squeeze value out of every dollar spent on total rewards programs is necessitating a rethink of what’s included in those programs, said Ofelia Isabel, a managing director at Willis Towers Watson, also speaking during the session.
With millennials now making up the majority of the Canadian workforce and the remainder of baby boomers set to retire by 2029, the future is here, she said, noting the workforce of today has different expectations than the previous one. “People expect to be treated like consumers.”
Employers may also have different expectations, said Lila. While employees used to stay with the same employer for 25 to 40 years and have a “very strong defined benefit pension plan, which would keep you with that employer as a form of deferred compensation,” the expectation now is employees will move on more quickly. So employers should think of their total rewards program as a subscription that employees want to continue to buy into every day, noted Lila.
That means those programs — which Isabel said now include employees’ pay, benefits, wellness and career trajectory — need to be person-centric and move away from the one-size-fits-all model. They should be aggregated and simple to access, personalized and flexible to allow employees of different ages and dealing with different life circumstances to select benefits most important to them.
In a Willis Towers Watson survey of 1,600 global organizations, the consultancy found leaders in total rewards were two-times as likely as others in their industry to have a clearly defined total rewards strategy and five-times more likely to want to differentiate their offering from the pack.
On flexibility, Isabel said, “even leaders say they fall behind,” but were twice as likely as their peers to provide that experience than industry laggards.
Isabel noted the difference between leaders and laggards is mindset. Leading employers have moved away from thinking about how to pay for and manage their programs, to asking how their programs can treat employees who need them “like they’re a human being,” she said. “The programs you end up with and the way you deliver them ends up being quite different.”