The Psychology of Pay

The discussion in the monthly evening meeting of NHRD Bangalore on the topic " Psychology of Pay" organized on 28th March 2019 was led by Mr Arvind Usretay, Director Talent and Rewards, Willis Towers Watson and his colleague Jude Vijay. The one take away from the discussion that reverberated whole through the evening was that perceptions of people differ and therefore no pay concept fits all. Some are more interested in short term immediate gratification while others are interested in long term benefits such as pension. In between, there are those who would like to pick from a basket, different aspects of the benefits that matter to them (Basic pay, variable pay, pensions, executive pay etc).

Pay and rewards have an emotional component. Individual preferences are dynamic and varied. Different approaches are required for various elements of pay.Deferred reward implies sacrificing immediate compensation for a future reward. People react differently to a disappointment in a pay rise which is influenced by individual mindset and perception about the situation or event  . As for example someone may become so upset that he may put in his papers while another person may take it as a challenge and work harder till his goal of the expected pay is attained. Today, employers are willing to be flexible and are open to customization of pay to the individual needs of employees. Ideally two or three choices can be given for a particular section of benefit. It may not be a good idea to give too many choices which could confuse the employee and may not at the end meet the needs of what he/she really wants.

The speaker said that differing needs of employees have more to do with differences in the personality and approach to life rather than economic differences. He said that a country head of a multinational company told him that those earning $10,000 and $100000 have similar approach and worries concerning money. Arvind said that there is a tendency to discount the value of compensation that is deferred, although it also has its place in the 'psychology of pay'. However to a question from the audience about the preferences of the the millennial generation, he admitted that they are clear about wanting high pay and was not concerned much about the future.

During the question answer session one question raised  was " Does not money lose its significance beyond a point? Are not people more interested in aspects such as Flexi time rather than pay?" . The answer was interesting and in line with the tone and tenor of the discussion throughout the evening-
 "Well, it differs from person to person. you need to meet with people. find out what is important to him/her and seek to fulfill individual needs".

Thus it is all about making available higher flexibility to the employees and having an integrated total rewards strategy consisting of pay, benefits, career and well being. According to the Willis Towers Watson findings, the five areas critical to meeting employees' total reward expectations and delivering a consumer grade experience are (1) Understand what employees value (2) Consider employee well being, a top priority (3) Make effective use of technology (4) Measure cost and impact of programs and (5) Prioritize fairness, purpose driven benefits and I &D. This would involve improving technology solutions, more personalized and transparent communication and higher flexibility to employees with a focus on more measurement of ROI.

After all,  perceptions differ and no pay concept fits all!