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Old-school benefits have been around for generations, and for good reason. Things like competitive compensation, health insurance, and generous PTO are the backbone of any good total rewards strategy.
However, employee expectations have evolved over the past few years, and now, these traditional benefits aren’t enough. Employees have come to expect good pay, good insurance, and paid holidays. And meeting those expectations isn’t enough to keep employees happy or loyal.
Think of it this way. When buying a home, you probably expect a solid, sturdy foundation. But you want more than that: you want an open layout, modern appliances, nice floors, and quality electrical work.
This is the difference between when employees expect and what they want. In other words, this is the difference between traditional benefits and non-traditional benefits.
Shifting Employee Expectations
So traditional benefits are important for attracting and retaining talent, but they’re not enough. In fact, a survey conducted in 2022 found that the the factors most likely to lead to retention include:
- Workplace flexibility (41%)
- Meaningfulness of work (39%)
- Health and wellness support (30%)
On the flip side, the factors that most lead to turnover and attrition are:
- Lack of career development and advancement (41%)
- Inadequate total compensation (36%)
- Uncaring leaders (34%)
While poor compensation will drive employees to leave, modern benefits, such as flexibility, wellness support, and value-driven work will convince them to stay.
The Role of Total Rewards
This brings up total rewards. Total rewards has become a buzzword because many companies have realized that compensation and benefits aren’t enough anymore. This realization has led them to offer more in the form of total rewards.
We argue that compensation and traditional benefits aren’t even part of total rewards. The word “compensation” is actually the opposite of the word “reward.” Compensation is an expected payment for services rendered. On the other hand, rewards are usually unexpected and are given in recognition of service or effort.
Ask your employees if they think of their paycheck as a reward—we tried it, and no one said they did. Your total rewards strategy needs to incorporate modern, non-traditional benefits that go beyond the scope of compensation and traditional benefits.
Traditional Benefits vs Non-Traditional Benefits
We want to make this clear: both traditional and non-traditional benefits play a crucial role in a company’s efforts to keep employees satisfied, and both have advantages and disadvantages. Let’s look at each of these in greater detail.
Importance of Traditional Benefits
Traditional benefits include things like salary, healthcare benefits, PTO, retirement plans, and bonuses. These create the foundational layer to your compensation package. Without them, even the most attractive modern perks would be less likely to entice potential employees.
Because employees now expect a competitive salary, insurance that covers their needs, and PTO that allows them to maintain a work-life balance, these traditional benefits are more important now than ever.
Drawbacks of Traditional Benefits
Despite the fact that traditional benefits are a must, they simply aren’t enough. Most companies have upped their game in the past few years and improved their benefits offerings, which means that even robust traditional benefits won’t help you stand out from the crowd.
Merely meeting basic employee needs isn’t enough in today’s competitive job market. Companies must go the extra mile by providing modern, desirable benefits.
Importance of Non-Traditional Benefits
Non-traditional benefits include perks like flexible work, unlimited PTO, employee recognition, commuter benefits, wellness support, childcare, and Lifestyle Spending Accounts (LSAs).
These types of non-traditional perks are important to the vast majority of the workforce, with 85% of employees saying they improve morale, 82% saying they improve retention, and 73% saying they improve company culture.
While traditional benefits fulfill employee expectations, non-traditional benefits exceed them. They help employees feel valued, cared for, and appreciated, which leads to higher productivity, lower turnover, and greater happiness.
Drawbacks of Non-Traditional Benefits
Alone, these modern perks won’t meet employees’ needs. Employees need both sufficient compensation/insurance AND modern benefits to enjoy a well-rounded total rewards package.
General Workforce Expectations
Baby boomers and Gen X employees value salary, health insurance, retirement plans, and work-life balance. However, the largest portion of the workforce, Millennials, want more autonomy, flexibility, work-life balance, and choice when it comes to benefits. Gen Z employees, the youngest group, want attentive bosses, a good work culture, great pay, and flexible hours.
As you can see, expectations are shifting, and as the older generations retire and leave the workforce, employee expectations will continue to evolve. Things such as work-life balance, flexibility, employee choice, and company culture will continue to grow in importance.
Adapt Your Total Rewards Strategy for Today’s Modern Workforce
Compensation, benefits, and total rewards are integral for recruiting and retaining the best employees. Competitive salaries, health insurance, and bonuses are a must, of course, but companies need to start offering more modern benefits for the growing young workforce, including more flexibility, more autonomy, and more recognition.