Reward strategy or pay strategy is the consistent making of fundamental choices that ensure maximum return on investment in your HR and payroll policies, both in the short and long term. Reward strategy is about where you differentiate yourself from your competitors in the job market - you can't be better at everything and financial resources are not infinite.
Well, as a company, do you want to be able to make a difference in the labor market? As a company, do you want to ensure that the investments you make in your human capital yield maximum returns?
If the answer to those two simple questions is "yes," then you MUST be engaged in pay strategy.
And then you're no doubt thinking: shouldn't every business answer a resounding "yes" to that? Without a doubt. Every enterprise should be working on this.
Our experience tells us that it is the frontrunners who are doing this, who embed (pay) strategy into their DNA.
Of course...
Companies that do not make a difference in the labor market have a hard time attracting and/or keeping people.
If you want to make a difference in the job market as a company, you have to make strategic choices about where you want to be better than your competition (and in what you don't).
After all, you can't be better at everything.
And so it's best to invest your resources in things where you can make a difference.
Of course not...
When you invest, that investment must yield a return in the short or long term. That may result immediately in hard currency, but equally, the short-term return is more likely to be non-financial in nature and the investment only pays off in the longer term.
Your human capital is an investment. That means the investments you make in your human capital must pay off.
And when you make investments, you want to maximize the chance of return on investment.
For that reason, you want to make conscious and consistent choices regarding what you do and do not invest in in terms of your human capital.
Indeed, strategy is often misused too often and is often presented as something intangible and abstract.
Nothing could be further from the truth.
You can make strategy very tangible. Because strategy is essentially about making consistent choices, about what to invest in and what not to invest in.
In the case of business strategy, it's about consistently making choices to differentiate yourself from the competition on a business level - this is fundamental for any business. Why do customers buy from you and not from your competitor? You can't be better at everything than your competitor.
Pay strategy is about consistently making choices in line with business strategy. Why do your employees work for you and not your competitor? You can't be everything to everyone. By the way, pay strategy follows from business strategy, not the other way around.
To make those choices consistent and informed, you need a framework to shape both your business and pay strategy.
Wage strategy is about so much more than the euros the employee receives directly or indirectly in his/her bank account at the end of the month.
Pay strategy deals with the total package of cash, benefits and non-financial compensation (such as autonomy, flexibility, vacation, training, etc.).
In that sense, reward strategy is about what you as a company need to invest in to motivate your people to achieve business goals. Therefore, the English term reward strategy covers the charge better than pay strategy, so it is actually better to speak of motivational strategy.
Every company is different - the culture, the people, the context and legacy, the strategy ... Therefore, every pay strategy is also different.
Developing a reward strategy statement - the explicit, written representation of pay strategy - is customized.
That doesn't mean there isn't a validated framework for developing a payroll strategy that works for your business. In fact, there is. There are also calibrated processes for effectively putting your pay strategy into practice.
The hukaroi framework approaches wage strategy from three dimensions that interact with each other:
Would you like to immerse yourself in our framework? Well, then we have good news for you! We are currently writing out our framework in a paper.
Well, a good start might be to read our reward strategy playbook on it.
In this paper, we explain the three distinct phases and what you need to focus on within each phase to make your pay strategy project a success:
This paper is essentially a guide on how to get started with pay strategy and contains numerous insights on why it is all the more relevant today in the war for talent.
We help companies through the entire process from positioning on business and pay strategy to implementation of that strategy.
In this, we are unique in Belgium (and beyond). No other player offers such an integrated course. Why is that? Well, it requires a rare combination of expertise and capabilities, such as HR legal, business and payroll strategy, data analysis, calculations and the financial translation, software development and development of advanced mathematical models.
On the other hand, we can also help with delineated subprojects within that whole.
Consider the following projects:
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