While flexible work arrangements are fast becoming standard at companies around the world, their impact on how people are rewarded remains vigorously debated. Earlier this year, top female employees at Swiss bank UBS voiced concerns, and some resigned, after their bonuses were not restored to previous levels following their return from maternity leave – in some cases, taking three years or more to recover.
The changing nature of flexible working poses challenges for rewards. In the past, if full-time employees worked more than their contracted hours in a week, they would be paid overtime; part-time workers’ paychecks would be slimmer. But flexibility is no longer just about the number of hours someone works. Instead, organizations need to consider the 5D nature of flexible working – when, where, and how the work is done, what work is done and who performs it.
The UBS case illustrates how rewards issues can arise when workers flex out of work, too – after parental leave or study sabbaticals, say. Increasingly, employees believe this is the most important aspect of flexibility: whether a company rewards them fairly and equitably when life-changing events require more leeway to orchestrate life and work. There is clearly much room for improvement, with one in three employees believing that working flexibly will harm their career prospects.
As flexible working becomes more nuanced, the consequences for a broad range of rewards, from pay to benefits, can muddy HR’s attempts to establish consistent policies. Should employees have the same health benefits whether they work part-time or full-time? Is the career progression of a part-time worker the same as a full-time employee? If flexible working is difficult for a given department to adopt, should HR rule out flexibility for all? How should a manager balance fairness within a team if some are working flexibly and others work traditional schedules? The result can be a hot mess of case-by-case decisions.
So what can organizations do to deliver a fair and consistent rewards experience for flexible employees that also benefits the business?
1. Trust employees to take accountability for flexible working. It is impossible to develop HR protocols to cope with all the practical permutations of flexible working. More valuable is to build an environment in which leaders, managers and employees expect and trust each other to act responsibly. Establishing a culture of trust around the choices offered to individuals often enables autonomy and empowerment – both powerful drivers of organizational agility. Pharmaceutical company Sanofi, for its part, eliminated manager approval for flex arrangements – which placed more onus on each employee to make flexible working successful. Sanofi has seen a boost in productivity since this bold show of support for flexible working.
Getting this trust-based arrangement right requires greater emphasis on the how aspect of flexibility – how to vary the intensity of work – as well as its rewards and implications. Consider employees who have no caregiving demands; their situation may change rapidly if they have to look after ageing parents. At the heart is getting managers to trust that working flexibly does not diminish an individual’s dedication to the job – and to relinquish the notion that the number of hours spent in the office is a fail-safe indicator of commitment. In such a scenario, the employee and employer would benefit from an open discussion about expectations and whether the organization is willing to protect pay and rewards, such as bonuses, in changed circumstances.
Building a trust-rich culture starts with leaders. Still, HR has a key role in ensuring people are trusted to act within a framework. In the past, this would have meant rigid HR policies and procedures. These days, it’s more likely to mean principles and guidance from HR, such as supporting managers as they implement flexible frameworks, helping co-workers to buy in to peers’ flex working, and establishing a mechanism to catch any abuses of trust on either side.
2. Link Rewards and achievements. Today, the previously strong link between the hours an individual devotes to a company and their salary is being called into question as part of a broader debate around what organizations are paying workers for.
Traditional pay-for-performance approaches measure and reward people based on the results they achieve. Flexible working, however, tends to fixate on varying pay according to time spent. The contradiction sends mixed messages to employees about what outcomes the company values.
Even the typical pay-for-performance approach is evolving. Organizations recognize that trying to pack too many purposes into the annual low merit increase isn’t working and, in any case, the model is flawed, with research suggesting only 25% of a manager’s rating reflects an employee’s actual performance, while manager predilections make up the rest. With rewards for performance moving toward bonuses and career progression, there is even less reason to determine salary according to rigid working hours in a fixed location.
Discussions about flexibility are helpfully re-orienting the debate onto impact and progression (that is, skills development and progression between jobs). Take financial services firm American Express. In Europe, the firm makes pay decisions based solely on employees’ achievements, whether they work flexibly or not. In addition, managers at the company are assessed on how they enable flexible working. And legislation may play a greater role, although the direction differs considerably by region. In the UK, for example, a proposed bill aims to drive progress by making flexible working the default for all employees. In contrast, stringent policies on working hours in Asia (notably China, Malaysia, South Korea and Taiwan) make it nearly impossible to allow flexibility while remaining legally compliant.
3. Use technology to handle complexity. Managing flexible working and its impact on rewards occupies an inordinate amount of HR’s time. This is particularly true in company cultures that emphasize HR-driven norms and policies. In such an environment, automating processes can help manage the variations of the rewards deal impacted by flexible working, such as health benefits or pension entitlements. Automation and artificial intelligence (AI) also enable a more continuous review of an individual’s pay, so that benefits can be adjusted quickly. And as AI gets even more effective, it may even recommend how to allocate rewards in an unbiased, evidence-based and sophisticated way. Further, technology platforms such as SAP can collect data on employees’ working preferences and the company’s workload so managers can efficiently allocate resources and boost productivity.
Rising to the challenge of flexible working
In determining how to reward flexible workers, a good place to start is by assessing which roles can flex most easily and using technology to overcome the administrative hurdles of flexible working. Every year since Mercer started its Global Talent Trends Study, employees tell us they want more flexible work options. With flexibility becoming an intrinsic part of the employee experience, it is time for organizations to ensure rewards are flexible, fair and equitable.