Future: Reward Europe – The Highlights

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Future of Work

Future: Reward Europe – The Highlights

06 August 2024 / Article

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The evolving landscape of compensation policies and the need for companies to adapt to legal requirements, employee expectations, and investor and market demands is driving more innovative approaches to pay. The Conference Board gathered senior executives responsible for compensation policies for a two-day event on June 20 and June 21, 2024, to consider the changing landscape of pay and share their solutions.

Trusted Insights for What’s Ahead

The use of ESG incentives is growing, With some 70% of senior leaders now having ESG targets in their compensation, the question is increasingly not whether to include ESG targets in pay, but how to do it well. Companies need to evolve their ESG metrics to ensure they focus on material issues that require a step-change in business operations, reinforce strategy, and ensure leadership accountability.
Skills based pay is trending. Tight labor markets and persistent skills shortages are prompting a move towards pay awards primarily based on key skills, rather than seniority and length of service. Assisted by AI-enabled technology, companies are now better able to identify employees with mission critical skills or those with a high market value. However, skills-based pay may be complex to implement, with the risk that a lack of objectivity and transparency in skills assessment may demotivate some employees. Implementing a skills-based pay structure may be difficult to justify legally, creating legal risk for the organization.
Benefits go strategic. The range and purpose of benefits are expanding as companies look to their benefits program to enhance talent recruitment and retention, and to support employer brand and culture. Non-financial benefits are on the increase, as are benefits linked to employee life stages and to supporting well-being. Responding to employees’ environmental concerns, some companies are also introducing pro-environmental “green” benefits in areas like transport, for example benefits that support biking to work, the use of electric cars, or reduced business flights.

The evolving landscape of compensation policies and the need for companies to adapt to legal requirements, employee expectations, and investor and market demands is driving more innovative approaches to pay. The Conference Board gathered senior executives responsible for compensation policies for a two-day event on June 20 and June 21, 2024, to consider the changing landscape of pay and share their solutions.

Trusted Insights for What’s Ahead

The use of ESG incentives is growing, With some 70% of senior leaders now having ESG targets in their compensation, the question is increasingly not whether to include ESG targets in pay, but how to do it well. Companies need to evolve their ESG metrics to ensure they focus on material issues that require a step-change in business operations, reinforce strategy, and ensure leadership accountability.
Skills based pay is trending. Tight labor markets and persistent skills shortages are prompting a move towards pay awards primarily based on key skills, rather than seniority and length of service. Assisted by AI-enabled technology, companies are now better able to identify employees with mission critical skills or those with a high market value. However, skills-based pay may be complex to implement, with the risk that a lack of objectivity and transparency in skills assessment may demotivate some employees. Implementing a skills-based pay structure may be difficult to justify legally, creating legal risk for the organization.
Benefits go strategic. The range and purpose of benefits are expanding as companies look to their benefits program to enhance talent recruitment and retention, and to support employer brand and culture. Non-financial benefits are on the increase, as are benefits linked to employee life stages and to supporting well-being. Responding to employees’ environmental concerns, some companies are also introducing pro-environmental “green” benefits in areas like transport, for example benefits that support biking to work, the use of electric cars, or reduced business flights.

Hyper-personalization of rewards is challenging. A tight labor market and a diverse, multigenerational workforce is spurring companies to consider offering a new degree of highly tailored, personalized pay packages. The trend towards hyper-personalization can help talent attraction and retention, but there are practical challenges and risks. Companies will need to consider how to ensure pay packages remain equitable from a legal perspective, and provide clear information and education to equip employees to make informed choices.
Pay transparency goes global. There appears to be a decisive move among large international companies to introduce a global policy of pay transparency. This move is in response to the EU Pay Transparency Directive, which becomes law in June 2026. The directive mandates that companies with 100 or more employees based in EU member states must introduce comprehensive pay transparency and provide public in

Authors

Michel Syrett

Senior Human Capital Fellow
The Conference Board

Marion Devine

Principal Researcher, Human Capital, Europe
The Conference Board

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