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9 Reasons Why Your Employee Rewards System Still Sucks

Feb 22, 2021

It's time to get your employee rewards structure right - a key requirement for the success of your team and for your business. 

Now managers are bombarded with advice about pay – but the unfortunate thing is that most of that advice is wrong.

Maybe we already knew it, but employees form a major part of the value of a business. And if that’s the case (which it is), then it becomes pretty obvious that employee wellbeing and the governance of human capital overall needs to become and remain top priorities – from middle management all the way through to the c-suite, board and remuneration committees.

But here’s the problem – getting employee rewards and remuneration right isn’t just about making sure it’s consistent with your local minimum awards or workplace bargaining agreements. And it isn’t just about ensuring that the strategy or policy and outcomes of your pay packets support the overarching needs of your business.

While all that’s critical – if you want you people and business to succeed at least - truly getting the most out of your people requires a little more than that.

So here’s what I want you to do – either now or when you next get round to updating the pay packets for your employees - I want you to start thinking about employee rewards and compensation packages in terms of how it relates to your most important employee wellbeing metrics. The metrics that truly impact your employee rewards agenda.

In other words – is your remuneration strategy walking hand in hand with your employee wellbeing strategy or is it diametrically opposed to employee wellbeing? 

Now don’t worry – firstly, this stuff isn’t complicated. And secondly, I’m not about to just say “pay your people more” – quite the opposite actually. Plus, I’ve got a nifty little framework to guide you along the way.

So, to help get you started – here’s 9 metrics that I want you to consider when setting up your employee rewards packages. 9 metrics to help you find that sweet spot to ensure that you aren’t under paying or overpaying your employees.

And while I go through these, try and keep in mind this eternal truth: pay cannot substitute for a working environment high on trust, fun and meaningful work. In other words, a fat pay packet with a shitty workplace culture will not get you the same efficiency and productivity outcomes for your business as a fair pay packet and a healthy culture.

With that said - let’s begin!

First up is workplace security

Do your employees feel safe and reasonably secure at work? Do they have available to them what they need to thrive? Yes? Fantastic – this immediately forms part of your rewards package and means you don’t have to try and financially compensate your people for working in a place that won’t let them thrive.

The second metric is workforce competence

Do you provide your people with the opportunity to learn and master new skills and capabilities to perform in their current roles, to grow in their careers and remain employable despite changes in the future of there work? Yes? Again, great – if your business legitimately fosters employee growth and development then that’s a big tick of approval from your employees, and they’ll thank you for it by accepting compromises in other areas of your rewards structure.

Healthy company culture is the third metric

Are our people treated with respect and dignity? Is your culture inclusive and does it promote diversity? Is there an appropriate balance between performance expectations and developmental opportunities? Does our culture promote excessive risk taking or other behaviours detrimental to the company and its stakeholders? Does our culture support the right balance of risk tolerance for innovation?

Metric number four is leadership

Do your leaders lead with integrity? Do they act ethically? Do they strive to inspire your employees to do the same? Do your leaders communicate with transparency? And are those communications consistent with the intended purpose, values and culture within your business? Strong and effective leadership is critical for strong and effective teams – without it, your employees suffer and that will ultimately form a shortfall that you’ll need to compensate for in your employee rewards structure down the track.

Metric five is physical and emotional wellbeing

Here you need to be able to gauge what the physical and emotional wellbeing of your employees is, and what direction it’s going in. How are your people managing stress in their workplace?

Next up is financial wellbeing

Here you want to know how confident your employees feel in their ability to provide for themselves and their dependents, both now and in the future. Are your people able to accumulate savings at a reasonable rate? Can your people expect to retire at an acceptable age?

For more on financial wellbeing – check out last week’s blog post - How to Boost Employee Financial Wellbeing (Even if You’re the Wellbeing Grim Reaper) – for a financial wellbeing deep dive.

Metric 7 is purpose and autonomy

Another metric you want to keep tabs on is No. 7, purpose and autonomy: Are your people able to find meaning in their work? Do they sense that their personal purpose or mission aligns with that of the company? Now autonomy is a big one – if you’ve been listening to me for a while, then you’ll know that autonomy (or job control) form 1 of the 2 big essentials for employee wellbeing – the other being social support.

Metric 8: empowerment and enablement

Ok, now for metric 8 is empowerment and enablement: To what extent do you provide the tools, training, technology and opportunities to your people that allow them to unlock and their potential?

Metric 9: return on investment

And finally, metric 9 is of course return on investment: What is the payoff for the different aspects of your rewards structure? Can you demonstrate greater productivity, collaboration, creativity, sales, innovation, new product development or lower employee turnover? What is the impact on financial performance, value creation and shareholder return for the various aspects of your employee compensation scheme? If there are features of your employee rewards system that do not demonstrate sufficient ROI, then stop throwing money down the toilet and stop offering them.

Now I’ve mentioned 9 metrics that really should form the starting blocks for any conversation about the structure of employee rewards.

Free masterclass

A quick side note here – among an absolute tonne of other stuff, my free masterclass “How To Create and Launch a Profitable Workplace Wellbeing Program From Scratch” in March will go into this in depth – we’ll look at all the metrics that your business needs – and how to measure them - to be able to launch an effective and profitable workplace wellbeing program. If that interests you, then head over to and sign up (I’m holding the training in my Workplace Wellbeing Made Easy Facebook Group – so that’s where the link will take you. – I’ll throw the link in the show notes for you).

This stuff works

Now just to make sure my message here is clear on this whole rewards metrics business, let’s take a birds eye view. Imagine your employees rocking up to a workplace that scores highly on all of those metrics I ‘ve just been through. They feel safe and secure at work, they have legitimate opportunities to learn and master new skills, they are treated with respect and dignity inside a culture that is inclusive and promotes diversity, their leaders act ethically and with integrity, they are physically, emotionally and financially well, they find meaning and purpose in their work, and they have access to the tools, training, and technology required to reach their potential. Now you tell me, if your employee has all of that – keeping in mind that we haven’t even mentioned may packets yet – then do you think their ultimate remuneration will be front and centre on their mind? Of course not! Why? Because only a tiny fraction – or more likely none – of your competitors do this! And your employees know that, and they will thank you for it by being more open minded when considering your rewards structure.

So in essence, when you score highly on these 9 metrics, you give your employee compensation structure room to be flexible, room to adapt to the changing needs of your business, room to survive when say, your business is hit with revenue or cost pressures.

I’m telling you right now, any compensation package that you ultimately offer to your employees – provided it is fair – will matter a lot less in their mind when they are considering whether to come on board with you, stay with you, or refer other candidates to you if you can manage to get these 9 metrics right.

Pay is NOT a motivator

Now I know that some of you might want to hit back at me and say that salary, monetary bonuses and the like are huge motivators. Well I’m telling you right now that they are not. I’m going to go into this more in next week’s episode but here’s the thing about pay – it doesn’t motivate people. If you look all the way back to Maslow’s Hierarchy of needs all the way through to just about every peer reviewed piece of research since: Behavioural economics consistently tells us that pay or salary is what you call a “hygiene” factor. Your workplace either provides fair pay for a fair day’s work or it doesn’t. It’s black and white. Employees either accept it or they don’t. It’s a precondition for your employees being willing to work for you in the first place. Moving up from hygiene factors like salary, are “motivation” factors like acceptance, inclusion, recognition, responsibility, opportunity for advancement and room for creativity. These are what motivates people. So once an employee has their base needs met through their hygiene factors, like pay, they then have the bandwidth to become motivated by the application of motivation factors. Anyway, that’s a slightly longer story – and one that I’ll go into in more depth next week. 

That’s it for this week. Thanks for reading.

Please take care of yourselves, and I’ll see you again next week!


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