A Total View Of Employee Rewards

By Drew Robb Aug 1, 2007
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HR Magazine, August 2007Web-based tools make it easier for employees to see their total rewards.

Cuba Gooding Jr. isn’t the only one who wants to be shown the money. Employees as well want more than to be told they’re valued by employers; they want to be shown the evidence—not just their base pay but all forms of compensation, benefits, perquisites, and other direct and indirect payments.

Employers, for their part, are showing employees a fuller picture of the many ways their contributions to the organization are rewarded. “Companies are moving toward a more holistic view of compensation,” says Joe Loya, principal at Mercer Human Resource Consulting in Norwalk, Conn. “They are not just looking at base pay or even incentives, but at how they are helping individuals accumulate total, long-term wealth.”

Providing employees with total rewards information can be done through a stand-alone product, an outside service provider or the self-service modules of a human resource information system (HRIS). Loya says, “HRIS systems in and of themselves do not provide the full spectrum of information needed.”

Last year, aircraft manufacturer Boeing joined the growing number of companies that are giving employees full access to their compensation and benefits information—from pensions to 401(k) plans to health insurance and child care referral services. “We want engaged employees, and we don’t want them to worry about their health or financial future,” says Pam French, Boeing’s director of benefits, who works at the company’s Chicago headquarters. “Having it online allows the employee to see the breadth of the package that Boeing offers them and helps them to plan for a secure future.”

Many employers are finding that giving their employees direct access to information about their total rewards enhances the company’s standing and that of its HR professionals in the eyes of workers. It also may aid in retaining employees—a pragmatic effect in light of the staffing challenges presented by low unemployment and by the coming retirements of millions of highly experienced employees as baby boomers reach the end of their working years. The use of total compensation statements is one way companies can demonstrate their value to employees.

Highlighting value

According to France Lampron, vice president of compensation solutions for Plateau Systems Ltd. in Arlington, Va., compensation software and total compensation statements became critical in the 1990s as companies started moving toward pay for performance. While working as a consultant for a 20,000-employee financial services company that was moving toward pay for performance, Lampron says, she saw a need for automation. She established Nuvosoft Inc.—a software provider based in Waltham, Mass., until it was acquired this year by Plateau—and created its Rcomp software to simplify and speed up the compensation review process.

Lampron believes effectively communicating employees’ entire rewards package is an advantage in retaining high performers. Beyond salary and bonuses, she says, there are “long-term-retention items such as stock options and restricted stock” that managers can use to compensate valuable employees, and these should be part of the package communicated to employees. Companies that fail to include all of the elements of compensation could find themselves losing their best employees to competitors that simply offer higher base pay.

One challenge for HR is that some employee rewards, other than compensation, are not necessarily measurable in strictly monetary terms. “The definition that has emerged around total rewards goes beyond money and looks at career opportunity, personal and career development as well,” says Loya. To introduce nontangible rewards, such as career advancement, some companies are pulling data from a learning management system into their compensation statements to show what courses an employee has taken or can take, which brings them to the employee’s attention.

None of those rewards, however, will make any difference in retention unless employees know they exist and understand their value. Companies can provide employees with web-based tools that give them the full picture.

Streamlining the Process

The first step in developing tools to give employees greater access to their compensation information is automating the compensation review process. For Nintendo of America Inc., that entails reviewing the compensation of 1,200 employees in seven companies, each with its own compensation practices. Salaries and performance are reviewed annually, while bonuses are assigned every six months.

In the past, Nintendo’s compensation staff had to prepare 180 password-protected spreadsheets for managers to enter data on their own employees. “The system was too complicated; it caused a lot of problems with inaccuracy and not being able to see the data at different points in the process,” says Jill Vaslow, senior HR manager. “I felt there had to be a better way.”

In 2004, a local software developer told her about Nuvosoft’s Rcomp software, and Nintendo started implementation in January 2005. Vaslow spent two days doing a needs analysis with Nuvosoft and explaining how Nintendo’s compensation process worked. “I thought it would be an easy customization for them to do for us, but it turned out not to be as easy as we thought,” she says. “There were a surprising number of differences in the organizational hierarchy for performance appraisals vs. compensation.”

Nuvosoft made the necessary changes, and six weeks later the company returned with the customized software. Over the next month, Vaslow and her compensation analyst tested the software, and it was further refined before going live during the April review cycle.

With the software in place, managers can now enter an employee’s proposed compensation and have it automatically roll up to department heads, who no longer need to re-enter it manually. HR can also view the data as the process goes forward and point out to managers where, for example, they are starting to exceed their budgets.

“I feel it really added a lot of value to our role in the process because it means we can talk to people the whole way through,” Vaslow says. It also makes the final executive review much faster. The review process now takes half the time it previously required.

Once approved, the data are sent back to the managers for presentation to the employees, and the data are merged into the company’s HRIS system (Ultimate Software’s UltiPro HRMS), which includes self-service tools so employees can review their own compensation anytime.

Providing A Comprehensive Profile

Boeing takes a total compensation approach for its 137,000 employees. Boeing used to mail out an annual four-page total compensation statement to its employees, but last fall it moved those statements online. “We wanted to pull together for our employees the total value of the pay and benefits programs they receive,” says benefits director French. “The intent was to pull that all together in one place and do it in a very personalized and very interactive package.”

It is called Pay & Benefits Profile, and employees access it through the company portal. The software, hosted by benefits provider Aon Corp., extracts data from about 30 different sources at Boeing and its service providers. The profile includes not only salary and bonuses but also special services that Boeing offers its employees, such as the company’s travel and child care referral services, wellness programs from the Mayo Clinic, and elder care services.

“We have all sorts of great programs that they might not have been aware of,” says Tom Acker, PHR, program manager for the Pay & Benefits Profile. “Rather than each functional entity maintaining its own web site, this one integrates it all and provides links to the provider.”

The key to the site, though, is the personalization. Employees can see their own pay, bonuses, and medical and retirement benefits rolled into a total compensation statement and can see what those benefits cost the company. And they can see all the data in much greater detail than they could previously.

“Historically, we provided them with a printed mailer that contained four pages of information,” Acker says, but now each employee has access to about 34 pages of information pertaining just to that person. Employees also have interactive tools they can use for financial planning. After logging on, an employee can click on a “Planning for the Future” calculator, which pre-populates the fields with the employee’s 401(k) balance and pension plan. Boeing also works with actuaries to create tables estimating each individual’s Social Security income at various ages. The calculator adds these income sources into a projected retirement income.

Users can also enter data such as military retirement pay, investments and other income sources. Then they can enter expense data, including college expenses for their children, mortgages and expected medical costs, to determine whether their current retirement plan will meet their future needs.

“These tools should be viewed as a way to help employees plan their finances—how much should they save, how much they make, what are the tax consequences of some of their decisions,” says Bill Petrillo, a consultant with Watson Wyatt’s Technology and Administration Solutions practice in Boston. “This is really a service employers can provide that helps employees make the most of what is offered.”

Getting Feedback

Boeing relies on an outside company to aggregate its compensation and benefits data, while Nintendo uses a mix of its human resource management system and its benefits providers.

Acker says one of the advantages of having the benefits data online is that, in addition to being able to ask employees to fill out surveys on their use of the system, he can directly track which pages or services employees are using and which they are not. One thing he found, for example, was that people wanted quicker access to the retirement calculators, so Boeing moved this feature to a top-tier menu.

“One of the goals was to engage employees in planning for their retirement and educate them on their pay and the benefits Boeing provides,” Acker says. “Getting their feedback validated to us that there was a benefit to the employees and that they wanted to have access to that information.”

Drew Robb is a freelance writer based in Los Angeles.
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