Creating a total rewards strategy 

Employees today are feeling more positive about work than in years prior —thanks in part to employers’ investments in total rewards. Mercer’s Inside Employees’ Minds research shows that employees are reporting higher engagement and commitment. Other factors have contributed, too: labor shortages have somewhat eased, making workloads more manageable. The Great Resignation ended and quit rates settled back to pre-pandemic levels. And many employees have moved to roles where they’re more satisfied.

But just as organizations were settling into a new normal — with a focus on hybrid working, comprehensive health and well-being, digitalization, and upskilling — Generative AI (Gen AI) burst onto the scene. Many employees worry about the effects of new technologies on their job security and compensation.

Compensation is also top of mind due to an uncertain economic environment, as employees — especially those earning lower-incomes — continue to struggle to recover from inflation stressors. Actual compensation increases in 2024 were lower than employers projected: In November 2023, the projected average merit increase budget for 2024 was projected to be 3.5%, while the actual average merit increase was 3.3%.   While still higher than before the pandemic, and above inflation, increases are continuing to trend downward.

When asked how their employer can improve their compensation, employees first and foremost want more types of rewards and the opportunity to personalize their package. This request is not new and HR has been listening, with 51% of companies having recently implemented improvements in this area. But only 15% have gotten hyper-personalized, leveraging advanced employee listening and analytics to deliver the rewards that employees value most.

Personalization is not just about salaries and bonuses. This year, 46% of employees said they would be willing to forgo a 10% pay increase in exchange for additional well-being benefits and 41% cited increased employer contributions to retirement/savings programs.

But the difficult question remains: how do employers meet employees’ needs while also dealing with economic realities? The answer is: by putting sustainable, personalized programs into place that work for you today and tomorrow — rather than following trends. Organizations must continue to think about sustainable total rewards to attract and retain top talent over the next few years.