Outdated rewards structures can quietly erode trust, equity and transparency.
Key takeaways
Rising total cash compensation without clarity or alignment rarely improves engagement.
Clear, well‑governed total rewards strategies can reduce risk and strengthen employee confidence.
Compensation and benefits do more than support hiring and retention. They shape how employees judge fairness, consistency and leadership follow‑through.
As workforce expectations and ways of working continue to evolve, many organizations face a critical question: Do current total rewards programs still reflect how work is performed today?
As pay transparency expectations rise, outdated strategies can quietly weaken employees’ trust in their employer, increase risk and make routine pay and benefits decisions more difficult to explain and support.
The following five signs often indicate it is time to reassess whether your compensation, benefits and total rewards strategy is still optimized for your workforce needs.
1. The workforce has changed, but the rewards structure has not
Post-pandemic workforce changes reshaped how businesses compete for and retain skilled talent. Many have added new roles, strategically reorganized and modified their work location policies.
But, in many work engagements, we see that pay structures and benefits programs built for a simpler workforce have largely remained the same.
That misalignment shows up quickly. Evolved roles, increased skill expectations and significant geographic pay differences matter more now in recruitment and retention.
When compensation frameworks do not reflect those realities, inconsistencies follow, so do questions—from employees, managers and, eventually, governance or investor stakeholders.
An effective total rewards strategy should reflect how work is actually performed across roles, locations and career paths—rather than how the organization operated when the programs were first designed.
The labor market has slowed down materially, and that slowdown is not the same for everybody. We are seeing that K-shaped economy evolving even more; you have bigger firms still in good shape, but smaller firms struggling a little bit more.
Tuan Nguyen, RSM Economist
2. Pay decisions are difficult to explain—especially to employees
Employees’ growing demand for pay transparency includes expectations for clearer answers about how compensation decisions are made. Pay ranges, merit increases and incentive eligibility are now more visible topics.
Challenges arise when managers cannot explain how pay ranges were established or why outcomes differ between similar roles. Even competitive compensation can lose credibility when employees do not understand the decision-making process behind it.
Organizations that treat transparency as an ongoing governance discipline are better positioned to reduce friction, support managers and maintain employee confidence during periods of change.
3. Compensation and benefits costs keep rising, but engagement does not
Increased pay and expanded benefits do not always translate into stronger employee engagement and retention.
A persistent gap between spending and outcomes often points to misalignment. Employees evaluate total rewards as a whole—pay, benefits, flexibility, career growth, wellbeing support and financial security. They may also be influenced by corporate culture and perceived levels of investment in causes or initiatives they care deeply about.
When pay and benefits decisions are made without a clear view of what employees value most, spending can increase with little change in engagement and retention.
A structured review of total rewards can help organizations understand what employees care about most, as well as which programs drive outcomes and which simply add cost.
We know a lot of workers’ buying power has decreased with inflation, so if it's cost-prohibitive to pay them more to overcome that, what else is being added to retain them?
Anne Bushman, Partner, RSM US LLP
4. Rewards decisions are creating administrative or compliance strain
As compensation and benefits programs grow more layered, the operational impact becomes harder to ignore. Payroll corrections, tax questions, reporting complexity and manual workarounds are starting to pile up.
A single program rarely causes these issues. They usually stem from decisions made without fully considering payroll, tax and compliance implications—particularly for organizations operating across multiple states or countries.
Organizations with effective compensation and benefits strategies involve HR, payroll, tax and finance earlier in rewards discussions to help ensure programs are workable, compliant and sustainable over time.
Employees care a lot about flexibility. How do you turn that into part of a compensation package when it’s not directly part of compensation, but it is valuable?
Anne Bushman, Partner, RSM US LLP
5. Employees underestimate the value of the rewards you offer
Some employees focus on base pay and overlook the broader value of benefits, retirement contributions and longer‑term incentives. When those elements are not clearly communicated, employees may significantly undervalue their total compensation.
That disconnect matters in a labor market where employees regularly compare offers. An external opportunity may look more attractive on the surface, even when the overall value is comparable or lower.
Clear, ongoing communication—such as total rewards statements and targeted messaging—can help employees better understand the full scope of employer investment in their financial security and wellbeing.
Steps to strengthen compensation and benefits effectiveness in your workforce
Revisiting compensation and benefits regularly is not about chasing trends or adding perks. The focus is on alignment between workforce strategy, employee expectations and organizational risk tolerance.
A thoughtful total rewards review can help organizations:
Improve equity, transparency and defensibility
Strengthen employee trust and engagement
Better align compensation and benefits spending with workforce priorities
Reduce administrative and compliance pressure
For HR and rewards leaders, the focus is on ensuring total rewards strategies continue to align with today’s workforce and support what comes next. Begin a conversation with our compensation and benefits specialists to explore how market pricing, incentive design and benefits optimization can strengthen your workforce strategy and improve retention outcomes.
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