Total reward investment optimization (TRiO) Are you getting the optimal return on your investment in total reward?

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Disclaimer

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► Views expressed in this presentation are those of the speakers and do not necessarily represent the views of Ernst & Young LLP.

► This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances.

► These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.

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What is total reward?

► Total reward is everything an employee receives and perceives as valuable

► Every element of reward can be categorized on two dimensions

► Organizations offer different types of total rewards: Individual

Experiential

Financial

Col

lect

ive

Source: Benefits & Compensation International, Kantor (2013)

► Access: the employer facilitates access to the reward (no cost)

► Basic: a that must be provided to compete for talent

► Contingent: a reward impacted by employee behavior or performance impacts how much

► Differentiator: the program(s) that create competitive advantage

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More productivity

More attention

Conflicting interests?

Less cost

More value

vs. Organization

Individual

vs.

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Are you guessing, or do you know?

27%

59%

14%

Cost 57%

43% Value 71%

26%

Preferences 3%

We know for all We are guessing We know for some

Source: EY survey of general industry companies (2014)

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With TRiO*, you can know

* Total reward investment optimization

Three simple steps:

Act

Ask

Analyze

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Ask

Option 1 Option 2

Salary increase 5% 4%

Annual bonus target 10% 12%

Mobile phone No Yes

Flexible work 9:00 a.m. – 5:00 p.m. Anytime between 8:00 a.m. – 8:00 p.m.

Work from home Once per week No

Which do you prefer?

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Analyze – “conjoint analysis”

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Analyze

1.2 billion combinations!

Combinations Decrease

- -- - -- - -- - -- - - - -- - -- - -- - - -- - --

0

0 0 0

0 0

Increase

+ ++

+ ++

+ ++

+ ++

+ ++

+ ++

+ ++

+ ++

+ ++

+ ++

+ ++

+ ++

+++

+++

+++

+++

+++

+++

+++

Levels

5 5 6 6 5 5 6 7 7 4 7 7

Attribute

1 2 3 4 5 6 7 8 9

10 11 12

Current package

Salary increase Bonus Shares

Development Pensions

Leave Cars

Technology Group discount Parental leave

Wellness Flex working

5

25

150

900

4,500

22,500

135,000

945,000

6,615,000

26,460,000 185,220,000

1,296,540,000

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Analyze

Relative importance by age

0%

20%

40%

60%

80%

100%

Annual bonus Life insurance Parental leave Work from home

<20 20-29 30-39 40-49 50-59 >=60

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Analyze

Return

Modern portfolio theory – “efficient frontier”

Risk

Portfolio A

Portfolio B

► Applied to total reward:

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Analyze

Return

Modern portfolio theory – “efficient frontier”

Risk

Portfolio A

Portfolio B

► Applied to total reward:

Value

Cost

Package A

Package B

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Act

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Problem

Source: EY survey of general industry companies (2014)

16%

84%

Yes

No

Is your reward strategy clear, compelling and data driven?

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Not conflicting interests

More productivity

More attention

Less cost

More value

vs Organization

Individual

vs and and

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Isn’t it time to stop guessing?