The PeopleFluent-sponsored HR.com Future of Compensation and Total Rewards 2024-25 report has been released, and its headline finding is that 78% of respondents currently consider their approach to be only moderately effective at best. In this article, PeopleFluent Product Marketing Manager, Katie Coleman, looks at the tactics used by the 22% with advanced and innovative total rewards strategies.

The latest HR.com Future of Compensation and Total Rewards report paints a picture where the vast majority of organizations are struggling to evolve their strategies. In the survey used to construct the report, HR.com’s HR Research Institute asked how respondents would describe their organization’s compensation and total rewards approach on a five-point scale. Only 22% chose the top two responses:

• 17% responded with “Advanced,” defined in the framing of the question as “Structured, equitable, strategically aligned, includ[ing] solid metrics and compelling benefits.”
• 5% claimed their strategy was “Innovative,” described as “Structured, equitable, strategically aligned, agile, data-driven, future-focused, and help[ing to] drive organizational change.”

The report labels businesses in these two categories as “more mature total rewards (TR) organizations.” So what are they doing to make their programs more effective? Let’s look at some key findings from the report that hint toward best practices in total rewards strategy.

1) More Mature TR Organizations Are More Likely to Have Recently Revised Their Approach

The report suggests a certain amount of stagnation in compensation strategy—only 50% of organizations have changed their overall strategy in the last two years, and over a quarter of respondents say that their overall strategy hasn’t changed in the last five years. Organizations with more mature total rewards strategies are twice as likely to have changed their overall strategy within the last two years, and they’re also more likely to have redesigned specific compensation practices, such as benefits programs, within that timescale.

It is recommended that organizations re-assess their overall strategy more regularly, identify weaknesses, and demonstrate to leadership how stagnant compensation strategies impact the organization.

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2) More Mature TR Organizations Track a Wider Range of Compensation Metrics

Pay range metrics, providing the upper and lower limits of compensation, are the most popular for compensation measurement, and according to the report, they’re used by 59% of organizations. However, organizations with more mature total rewards strategies are far more likely to use this and a range of other useful metrics to inform their programs:

• 93% of mature TR organizations use pay ranges, compared with 59% of all respondents
• 67% of mature TR organizations use total cost of workforce (compared with 46%)
• 65% of mature TR organizations use compa-ratio (compared with 36%)
• 65% of mature TR organizations use internal equity metrics (compared with 30%)
• 65% of mature TR organizations use range midpoint (compared with 36%)
• 63% of mature TR organizations use market ratio (compared with 27%)
• 54% of mature TR organizations use geographic differentials (compared with 26%)

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3) More Mature TR Organizations Offer a Variety of Benefits to Attract and Retain Talent

The report names employee retention and attraction as the top two drivers for the compensation decisions that organizations make—69% named retaining key talent and 43% named attracting key talent. A series of follow-up questions then examine the specific tactics they use. The vast majority offer employee healthcare plans (81%), with retirement and financial well-being benefits (68%), and remote work and flexible scheduling (60%) being the next two most common benefits.

Five benefits that are significantly more likely to be used by organizations with more mature total rewards programs are highlighted in the report. These are:

• Fair and equitable pay (87% versus 39%)
• Learning and development opportunities (78% versus 48%)
• Wellness programs (65% versus 27%)
• Compensation above market rate (32% versus 10%)
• Flexible compensation options (24% versus 7%)

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4) More Mature TR Organizations Are More Likely to Offer Flexible Working Options and Allowances

Looking specifically at work-life balance benefits, the report finds that 88% of employers offer a PTO program. Other benefits in this category are less universally adopted, creating a point of contrast between more and less mature TR organizations. 88% of the more mature group have flexible work arrangements (such as hybrid work or flexitime), and these organizations are also five times more likely to provide allowances and subsidies for working from home (38% versus 8%).

Other work-life balance benefits you’re more likely to have as an employee of a more mature TR organization include:

• Assistance in interacting with insurance and benefits providers (69% versus 41%)
• Parental and caregiver leave (67% versus 26%)
• Assistance with services such as caregiver referrals (33% versus 9%)

5) More Mature TR Organizations Cover a Wider Spectrum of Health and Wellness Benefits

The extension of health and wellness cover to mental health support is common among more mature TR organizations: 86% of companies in this category offer this type of support, whereas only 40% of less mature TR organizations do the same. Similarly, more mature organizations are significantly more likely to offer coverage for physical and mental health services or medications (84% versus 49%) and medical leave policies with defined durations and extension options (74% versus 47%).

Benefits that are niche in less mature TR organizations but are relatively common in those that are more mature include wellness reimbursements (49% versus 20%) and crisis intervention services (44% versus 11%).

6) More Mature TR Organizations Incorporate Fair Pay into Their Pay Philosophy—And Think AI Has a Role to Play

Earlier, we noted that mature TR organizations are more likely to work towards achieving fair and equitable pay (87% versus 39%). The report also examines the contrasts in how organizations go about providing fair and equitable pay. 88% of more mature TR organizations use real-time market data (compared with 32% of less mature TR organizations), and 81% conduct periodic reviews to evaluate fairness (versus 26%).

One of the starkest contrasts in the report involves organizations that incorporate fair pay into their pay philosophy—while 69% of more mature TR organizations do this, 0% of less mature TR organizations reported doing this.

Another notable difference is that those in more mature TR organizations are nearly twice as likely to say AI will improve pay transparency (28% versus 16%). These organizations were also more likely to anticipate AI-related gains in the identification of disparities in compensation and rewards (53% versus 39%) and improvements in pay and performance links (38% versus 24%).

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