Rethinking compensation and rewards to advance employees’ sustainable lifestyle – HR, are you there?

Several studies both from academic research papers and corporate reports have evidenced the integral and inevitable role played by compensation and rewards in employee recruitment, retention, satisfaction, motivation and productivity (Rojikinnor et al., 2022; Ben-Gal et al., 2022; Sija, 2022; Putra and Mujiati, 2022; HRReporter, 2021). The advertisement of job roles across all industries today have evolved from the traditional profiling of the positions with attached salaries to a comprehensive presentation of the whole remuneration or benefits package. Generally, companies define their competitive offers with proxies such as enhanced pension, private health and employee discount schemes, annual pay reviews, profit-related pay and training and progression opportunities. The place of perks has also evolved over the past decade or two as part of the rewards schemes operated by companies.

Core stakeholder audience 

The HR function concerned with compensation and rewards is always brainstorming for creative and innovative ideas to model their benefits scheme as a strategic selling point to employees as an assurance of competitive compensation for their talents, skills and commitment, to investors as an affirmation of a well-motivated pool of talented employees working towards shareholders’ wealth maximization and to customers as a pledge of a conducive working environment for an excellent customer experience and service delivery. That's not all, however - the tactical functions of compensation and rewards can also be extended to the sustainability discourse and strategy of an organization. 

Employees’ sustainable lifestyle  

While companies are striving to improve their sustainability practices and outcomes, especially with Scope 3 emissions measurement and reduction, the subject of employees’ sustainable lifestyle has generally focused on carbon footprint reduction in areas such as the type of transportation used for commuting, food and waste disposal.

Largely, organizations’ supportive sustainability-funded schemes have focused on initiatives such as employee discounts for electric bike purchases, incentives for bus users and whatnot, but this article argues that employee compensation and rewards schemes as a whole can be redesigned in an innovative way where existing resources and channels can be used to improve employees’ sustainable living and behaviour. 

Insights from Deloitte Customer Sustainability Report

A recent survey by Deloitte on how consumers are embracing sustainability revealed that pro-recycling behaviour, reduced food wastage and limited use of single-use plastics were amongst the top sustainability efforts (Deloitte SCB Report, 2022). However, on the main barriers to adopting a more sustainable lifestyle, the top five responses were, “Its too expensive”, “I’m not interested”, “I don’t have enough information”, “I don’t believe it makes a difference” and “it’s too complicated/difficult to do” respectively. If employees are proxied as customers and vice versa, then these responses highlight two critical issues of employee spending power and sustainability education. This is where reimagining compensation and reward becomes strategic.

Conducting a materiality assessment 

Conducting a materiality assessment on what entails the needs and barriers to employees’ sustainable lifestyle can be the first and major step to developing a matrix that can help an organization in designing, prioritizing and embedding sustainability education and incentives in the compensation and rewards policy and scheme of your organization. Thus, compensation and rewards then become the ignition and incentive to drive information sharing, individual-tailored education and improving employees’ purchasing power and choices. Thus, gift cards and vouchers given out through rewards and compensation will be tailored to shops and platforms that meet the sustainable lifestyle needs of employees. 

Redesigning/rethinking compensation and rewards 

This does not require expanding the budget or looking into other sources of finance but specifically realigning the focus of existing rewards to consider sustainable activities and products. For example, instead of giving Amazon and Love to Shop gift vouchers to employees to shop on these platforms, HR can look at a broader view of targeting and including companies that are comprehensively using and producing sustainable products. Where perks amount to $100, HR could give $120 for employees who will love to purchase from stores that use solely sustainably sourced products for fashion, furniture to kitchen wares, and the list is endless. For platforms such as Tentree where a product bought is used to plant ten trees, HR rewards could align their scheme to focus on providing gift vouchers to encourage employees to use and spend perks on these sites.

Employee discount schemes could also be a way of mapping rewards to sustainability-focused brands, most especially with startups that are innovatively redefining the sustainable products manufacturing landscape. This is not to even mention the benefits this will bring to the startup ecosystem. This scheme could also be used to attract and incentivize talents, investors, employees and customers who would want to work and be associated with a brand that supports employee sustainable lifestyle.   

Companies redesigning or rethinking their compensation and reward schemes to encourage employee perks and discount spending on sustainable products will not only be killing two birds with a stone through sustainability advocacy and refocusing employees spending in the area of sustainable living or lifestyle but will also enhance their organizations’ sustainability outcomes while developing a robust employee base well versed in what sustainable lifestyle looks like.  

References 

Deloitte SCB Report (2022) Deloitte Sustainability and Consumer Behaviour - How consumers are embracing sustainability. Available online at: https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html [Accessed 07/05/2023]

Rojikinnor, R., Gani, A.J.A., Saleh, C. and Amin, F., (2022) The role of compensation as a determinant of performance and employee work satisfaction: a study at the PT Bank Rakyat Indonesia (Persero) Tbk. Journal of Economic and Administrative Sciences.

Ben-Gal, H.C., Forma, I.A. and Singer, G., (2022) A flexible employee recruitment and compensation model: A bi-level optimization approach. Computers & Industrial Engineering, 165, p.107916.

Sija, A., (2022) Determinants of employee retention in private healthcare. European Journal of Human Resource Management Studies, 5(4).

Putra, I.N.S.K. and Mujiati, N.W., (2022) The effect of compensation, work environment, and work motivation on employee productivity. European Journal of Business and Management Research, 7(2), pp.212-215.

HRReporter (2021) How compensation and benefits can motivate employees. Available online at: https://www.hrreporter.com/focus-areas/compensation-and-benefits/how-compensation-and-benefits-can-motivate-employees/358978 [Accessed 07/05/2023]