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Deborah Rees

Innecto Reward Consulting

Director of Consulting

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Why Generation Y is changing your reward strategies


Generation Y currently make-up around a third of the global workforce; by 2025 it will be 75%. Each new generation grows up thinking they are different from their parents and the generation before but, in the case of Gen Y it’s certainly true. They have grown up as tech savvy global citizens with debt and financial uncertainty the norm. They’ve been brought up to be independent, self-confident and unafraid to challenge.  Responsibility and purpose are strong drivers for this generation with well-established ethics and values from an early age.

From an employer they want something different – careers aren’t steps they need to climb, they won’t put in years of dedicated work to find a healthy pension to keep them comfortable during 30 years of retirement.  The balance of power has shifted to one of partnership and equality.  Gen Y want to work hard and deliver results for their employer, but they understand their worth and what skills they bring. They are good negotiators who aren’t afraid to ask for what they want or leave if they don’t get it. In short the world has changed.

Employers have recognised the change and understand that they need to look at how they operate.  They realise they can’t mould Gen Y to fit their organisation; they need to change the organisation to fit Gen Y.

Top Gen Y talent is essential for an organisation that wants to thrive in today’s business world.  Disruption is the buzz word that accompanies this generation turning accepted norms on their head.  Genuine evolutionary and revolutionary thought leadership is King and the pace of change is eye-watering.  To deliver, organisations need the skills and experience of Generation X and baby boomers but, critically, they need the disruptive nature of Gen Y. 

What does that mean for Reward?

Gen Y has driven an exciting raft of new reward practices from volunteering to bespoke personal development and life stage related benefits.  More of our clients are developing reward strategies and practices with Gen Y in mind and segmenting their employees by demographic is the logical first step.

Annual Appraisals

The key issue is around the annual reward and performance cycle.  For a generation that is used to instant gratification and immediate feedback, waiting a year for an annual performance appraisal just doesn’t cut it.  All of us in reward and performance management need to ask if the annual cycle works or is it an effective way of rewarding people? Or do we need to be more flexible and build in smaller steps as we go along?

Pay Frameworks

A pay framework has always been an essential part of an organisation’s offering to its employees.  But, with a move away from traditional hierarchy and linear careers, the development of a culture of openness and a demand for clear and strong ethics around fairness and equal pay, your pay framework needs to stand up to increased scrutiny.  It needs to be based on sound principles that reflect your business and industry as well as having good benchmarking and evaluation at its heart.

Flexible Working

Flexible working has been a popular option for mums returning to work after maternity leave but it’s becoming attractive to the wider employee base.  Employees are often running their own business in their spare time or carrying out voluntary work alongside their job and want the flexibility to do that.


Sabbaticals are becoming more popular offering employees the opportunity to take unpaid leave from the business in order to pursue personal ambitions; for example travel or projects such as property development.  For organisations with a naturally ‘quiet’ season this can be of great mutual benefit.

Personal Development Opportunities

Education has been offered to employees as reward and motivation for many years but usually on the condition that the qualification or course is relevant to the role that they’re doing.  The emerging trend is to offer employees the opportunity to study subjects that are of general interest to them such as a language or creative skill.  Businesses are seeing the long term benefit that broad personal development, self-improvement and growth of individuals can bring.

Universal and Life Stage Related Benefits

In terms of benefits, there is a move away from differentiated benefits based on hierarchy towards a universal approach to reflect ideals such as ‘one team’ or ‘we are in this together’.  Alongside this we are seeing the introduction of flexible benefits based on life stage – such as graduates, families or empty nesters.  Making benefits contextual and relevant make them more valuable to the individual employee as well as reducing costs and wastage.

Volunteering Opportunities

Offering employees volunteering opportunities for community and charitable projects is on the increase.  38% of 16-25 year olds are volunteering once a month and employees are seeking employers that share this value and provide them with the opportunity to volunteer, whether that be by reading in the local school or supporting a charitable project.

Action Plan

  • Provide lots of regular feedback – not just once a year
  • Incorporate Corporate Social Responsibility  
  • Review your benefits offering  
  • Take a critical look at your pay structure – is it up to scratch?
  • Accelerate your pace
  • Make work more enjoyable!

6 Responses

  1. Agree

    Lucy, I think this is a good point – if we are too divisive in terms of segmenting the workforce then it tends to become a self-fulfilling prophecy. The workforce will become even more multigenerational as people live longer and work longer and I do see this segmentation becoming an issue, particularly as companies struggle to handle things like transferring intangible knowledge and ensuring collaboration and innovation between teams.

  2. Hi All,

    Hi All,

    Some really interesting view points and a great discussion. Certainly worth checking out Dan Pink who provides a very strong and persuasive argument, challenging the way in which organisations motivate their employees based on outdated and in effective methods.

    I'd just like to add some thoughts to this… Whilst there is much debate around Gen Y and Gen X and how the workplace needs to change to accommodate Gen Y, I think we may be missing the point. Categorising the workforce in to such groups is useful in some practical sense, but I'd question how accurate it is and how different we all are. It may be easier for organisations to segment their employees by demographics when it comes to reward, but is it effective? Do all Gen Y want flexible working? Do we all want regular appraisals and recognition? Are personal development opportunities going to get all Gen Y excited and motivated? Most probably not! What organisations are missing is that we are all individuals, regardless of whether we fall in to Gen Y or Gen X boxes. What motivates each of us will depend on our own drives and motivations – 'one size fits all' policies just don't cut it. I'm not disagreeing with any of the initiatives suggested in the article, I'm just asking whether having these policies in place is enough? Organisations that focus on understanding the individuals in the organisation, and then identifying appropriate ways to motivate and engage them are the organisations that reap success, increase performance and retain their talent. As Deborah says, all of the comments re Gen Y can apply equally to Gen X – the key is matching the reward or engagement initiative with the wants and desires of the individual.

    I'd recommend reading the Talent Q article 'What about me?' for more on the need for engagement to be personal.

  3. Thanks 🙂

    Hi Deborah, thanks for the thoughtful response and the book tip – it's on Kindle at quite a good price so I think I'll get it.

    Definitely agree with you that business are becoming increasingly better at creating more flexible and understanding environments, and especially on the point of autonomy being a key driver. I'm really curious to see what working environments and cultures will be like in 20 years if these trends continue… 


  4. Share your pain

    This is a really interesting response – and very insightful comment.  I suppose is the reality for many Gen Xers as well – work does not fulfil their 'higher purpose' and as you rightly say, the mid-life crisis in people's 40s is a response to the utter sense of frustration many employees feel. So how best to change it?  My take would be that a lot of the issues that Gen Y have vocalised and turned up the dial on, as outlined in your comment, apply equally to Gen X – and smaller businesses in particular have become much better at meeting employee needs in terms of flexing work, working in a project-based environment and accepting that employees have other drivers in their life – in comparison to the baby-boomer model. Daniel Pink in his book 'Drive' describes what is real about work, is that people gain satisfaction from autonomy, a sense of purpose (beyond profit) and mastery of their own specialism.  We've been spreading the word about that concept and encouraging employers to challenge their own preconceptions about work and engagement/satisfaction.  it's well worth a read if you haven't seen it – I think it would chime with and illuminate your own views.

  5. The real Generation Y

    As a Generation Y'er (born 1987) who works freelance and runs their own business, I largely agree with this, though I think you're missing something fundamental about my generation. 

    Ultimately, while we are certainly aspirational and confident, our worldviews are increasingly at odds with the paradigm of work culture, which is essentially a relic of the Industrial Revolution. Generation X'ers (except briefly in the late sixties) never seriously questioned the validity of 'getting a good job' in order to raise a family and create a culturally acceptable life for yourself. If that job fulfilled you, great, but it wasn't a prerequisite. 

    For us it is essential – and here's where the problem lies. A huge amount of Generation Y'ers across the social spectrum find the idea of  going to a traditional office uninspiring and unfulfilling. They are looking for something that adds meaning to their lives, and working for a company to do something whose sole goal is to make more money doesn't quite cut it. Even professional development or a sense of achievement from successes at work are fleeting and do not meet our ultimate quest for meaning and purpose. Remember – we Generation Y'ers were raised to believe we're all special (of course we all aren't, but we each believe we are) and so we expect to have a suitably grand purpose. The way a lot of Generation Y'ers see it, the corporate world is just too pointless, too corrupt and too boring to provide that purpose, no matter how many benefits or incentives we get.

    It's worth investigating the phenomenon of the 'quarter life crisis'. Like the mid-life crisis for Generation Xers, the quarter life crisis happens when a Generation Y'er realises that from a very young age, they have been led forward with a carrot on a stick – do well in this test and you'll go to a good school, do well there and you'll go to university, do well there and you'll get a good job, do well in the job and you'll get a better job…. until one day you wake up and realise that you've 'made it' but there's no 'it' to make – just perpetual motion. The feeling you were hoping to have is not there. If you're a Generation Xer this happened when you were maybe 45, now it happens at 25.

    So you get a lot of Generation Y'ers volunteering as you mention in the article, or if they're feeling particularly disillusioned, deciding to work in charity in order to find some deeper meaning. Unfortunately charity in our society is just as corrupt as standard capitalism and doesn't quite meet the need either. 

    And so a huge amount of Generation Y'ers are starting their own business and focusing on artistic pursuits. I would say less than 15% of people in my generation see work as anything more than a chore (sometimes tedious, sometimes ok, sometimes very fun) that enables more meaningful pursuits. We work hard because we want something that the money we earn from working will give us, but that we know the activity in and or itself won't. 

    So my argument is that trying to tailor your company to us should be tailored with the awareness that nothing you do will provide the fulfillment Generation Y is looking for.  We want money in order to follow our own pursuits and ultimately get out of the 9-5 monotony. The best situation for a Generation Y'er is to be freelance, do away with the employee/employer dialectic and instead have a more dignified client/contractor relationship in which nobody has to pretend that what they're doing has any meaning other than money. 

    TL;DR – Generation Y'ers see the traditional work culture as meaningless and unfulfilling, so don't waste effort trying to convince us it is or trying to force unity and team cohesion. Just create a meritocratic company based on mutual self-interest and everyone will be happy 🙂

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Deborah Rees

Director of Consulting

Read more from Deborah Rees