With business resilience moving back up boardroom agendas, it’s time to ditch outdated, one-size-fits-all compensation structures, says David Ellis, head of strategic reward advisory at BDO. Instead, he advocates more flexible reward models that allow companies to pivot when the economic and skills landscape shifts.
We’re living through uncertain times. Whether it’s inflation, market disruption, or political uncertainty, businesses are facing down challenges on multiple fronts with others looming on the horizon. This has brought resilience back to the top of boardroom agendas.
The more traditional areas for building resilience – such as in supply chains – have, understandably, grabbed the headlines. However, businesses are leaving themselves exposed if they don’t also look to their most important resource: their people. By adopting a more flexible reward model, organisations can obtain much-needed commercial agility but also foster stronger employee engagement, satisfaction, and retention — key factors in maintaining a talent advantage in uncertain times.
At the heart of this is the understanding that traditional, one-size-fits-all compensation structures are wholly outdated. Today’s workforce is more diverse than ever, both in terms of demographics and expectations but, as employees are the lifeblood of any organisation, the ability to adapt to their diverse and changing needs creates a strategic advantage.
In our experience, employees want personalised benefits that align with their life stages, values, and financial goals. A rigid pay and benefits system may have sufficed in the past, but now, organisations need the flexibility to offer solutions that appeal to a variety of needs, while safeguarding their own financial health in today’s fluctuating economic conditions.
The business case for flexibility
The rationale for flexible reward models is compelling. In periods of economic uncertainty, businesses are under pressure to control costs while still attracting and retaining talent. Locking into inflexible pay structures or benefits packages that don’t resonate with employees can lead to disengagement, high turnover, and ultimately higher costs — just when resources are already stretched thin.
Flexible models allow companies to pivot when the economic and skills landscape shifts. This could mean implementing short-term salary boosts for in-demand skills, adjusting bonuses, or offering non-monetary benefits, all without compromising the value proposition for employees. Instead of reactive, across-the-board cuts, employers can strategically tailor compensation and benefits in ways that both acknowledge economic realities and keep employees motivated.
Flexibility in action: beyond salary
Flexibility in reward goes far beyond tinkering with fixed and variable pay ratios. Companies that excel in this space have introduced a broad range of options for employees aligned with their overall mission and values.
For example, employees in their 20s and 30s may value loan assistance or more flexible leave options, while mid-career professionals might prioritise pension contributions or better healthcare coverage for their families. Older employees may seek phased retirement plans or opportunities to mentor younger staff as part of their package.
By offering a menu of options, companies ensure that employees can choose the benefits that most resonate with their current life circumstances, creating a sense of agency and control in their package.
Flexibility should also extend into how we choose to work. One of the most sought-after benefits today is flexible or remote working arrangements, a trend that accelerated in the wake of the COVID-19 pandemic.
This shift was initially driven by necessity, but it has become a permanent feature of many organisations’ benefits strategies. Remote working not only gives employees greater control over their work-life balance and commuting costs but also provides cost-saving opportunities for companies, which can reduce expenses related to office space and business travel.
Navigating costs: staying flexible in a downturn
Adapting reward offerings during economic uncertainty requires a fine balance between maintaining employee satisfaction, incentivising the delivery of strategic objectives and controlling operational costs. This is where policy agility comes into play.
For example, instead of locking into rigid pay raises, companies can adopt performance-based or outsized project-based bonuses that give high performers the opportunity to earn more, without setting unsustainable fixed salary increases. Similarly, offering non-monetary rewards, such as additional leave or professional development opportunities, can help offset the need for cash-based compensation when budgets are tight.
People first: openness has a strategic value
At the core of flexible reward models is a focus on the employee, particularly during times of uncertainty. Leaders must communicate openly with their workforce about economic conditions and the rationale behind any changes in reward packages.
Transparency helps foster trust, which is essential when making adjustments that might impact employee take-home pay or much-loved perks. By involving employees in these conversations, businesses can build a culture of mutual respect, where employees understand the external challenges and are more likely to remain engaged and committed.
These practices provide businesses with a powerful tool – a flexible reward model – to navigate the people challenges driven by economic uncertainty.
Administered correctly, this will enable cost control without sacrificing employee satisfaction, increase retention, and create a more resilient workforce.
In an era where change is constant, the ability to be agile and responsive is what will separate the leaders from the laggards.
