Assessing your total rewards offer Collating and analysing findings following the customer analysis

Introduction Gap analysis This analysis will help you to summarise and assess the current state of your Total Rewards in light of all of the research done around the MARKETS, COST, EMPLOYER AND EMPLOYEE views. It will help you assess the Total Rewards offer against the guiding principles, highlighting any key areas to change for change. We anticipate this review may take up to 3 hours The following pages will help you to gather your thoughts on each of the elements of Total Rewards from what you have heard in leadership interviews, employee surveys and employee focus groups. You will also need to incorporate the information you have gathered from completing the cost modelling and market data analysis On the following page, consider things about that element that stood out in each of these exercises. Was there anything that surprised you or were there any themes which showed up consistently across the tools in this section of the toolkit? Consider your strategic employee segments, was there anything in particular that stood out as needing to be changed to better support that segment? You will need to look back over your outputs from the leadership interviews, employee survey, employee focus groups and modelling spreadsheets We have included a table with questions which should help you to think about how each of your Total Reward elements compared with each guiding principle Once you have captured your key observations for each element and read through the questions, you should find it easier to fill out the gap analysis table and identify the key areas for change. We have included an example as well as a template for your convenience The outcomes from this gap analysis will then feed into a prioritisation matrix so that you can determine the impact and ease of implementation of your required changes

Summary analysis Key observations You will now have a lot of insights and analysis in your Total Reward review paper. This now needs to be assimilated into key messages so that gaps from desired practice can be identified When conducting these reviews, Mercer consultants find it helpful to identify the top issues that really stood out in each area of analysis. This helps to gather your thoughts before completing the gap analysis Leadership interviews: 1. (i.e. concerned about skills to meet business objectives) 2. 3. Employee views: 1. Cost modelling: Market perspective: Some questions have been put together (overleaf) which may help you identify any key issues

Using the guiding principles to draw central conclusions about each element of Total Rewards These questions are designed to support a review against each principal Total Reward element Principles Market competitive Aligns Total Rewards with performance Clear and understood by employees Attract, retain and motivate employees Support corporate behaviours Supports business goals Fixed pay Did the market analysis show any issues with competitiveness? Are any particular segments impacted? Did the survey receive positive feedback to the following question: “In my opinion, the following are as good as or better than those in other organizations: Our pay?” In the costs analysis, was there a correlation between base salary and performance rating? In the employee survey, did employees respond positively to the question : How good a job is your company doing in matching pay to performance? What feedback did employees provide in the focus groups about their pay? Did they understand how pay decisions were made? Did you receive any feedback from the focus groups around motivation? Were any particular issues identified? Did Leadership note the importance of Reward in supporting corporate behaviours? Did any particular issues arise? Are the roles which are critical to the corporate objectives (your key segments) rewarded competitively? Variable pay Does the pay mix analysis show that bonus and LTI levels are aligned with the market? Did interview and focus groups suggest employees feel bonuses reflect their performance? Is there differentiation in bonus levels? Is there a correlation between performance rating and bonus levels? Do people understand how their bonus was derived? If people are really disengaged with the bonus, then are the right people eligible and does the plan design work? Are behaviours considered in bonus plan design, or is it just performance output? Are performance measures are aligned with corporate objectives and strategy? Benefits Did the market review show all key benefits are broadly aligned with the market? Are costs of benefits provision competitive? Do they reflect changing legislation? n/a Did the employee survey demonstrate a high level of understanding in benefits provision? Are there high levels of usage / take-up of benefits? Did the employee focus groups demonstrate a high level of engagement with their benefits provision? Were any critical benefits identified as missing, impacting on any particular segments? For example was a certain demographic impacted? Does the benefits spend impact on the business expenses appropriately? Are there any legal risks? Growth Is there alignment between performance and the availability of training and development? Was this issue raised in the leadership interviews? Does the recognition programme reward individual performance? Are employees aware of the training and learning / careers support and recognition programmes on offer? Are employees having regular discussions with their managers about their performance? Were any issues raised about the quality of these discussions? Are employees happy with the recognition programme? Is behaviour considered in performance evaluation? If not, is this desired by leadership? Does recognition reward corporate behaviours? Are performance goals aligned to business strategy? Are leadership engaged with performance management? Are key talent receiving sufficient training? Work-life Are employees aware of the work-life environment provisions available, including Work-life flexibility, wellness programmes etc.? Do employees value this component of reward? (as demonstrated in survey results) Are people engaging in the CSV principals? Are there any business goals that require enhanced work-life provision? Are you failing to attract and employees because of this factor?

Assessment of Total Rewards Key This key will help you to make decisions about the strength of each issue that has arisen during your Total Rewards Review Use these points to make a decision about which colour to assign in the gap analysis. You should assign the colour which best fits the issue There is a large misalignment between current state and the guiding principle An issue has arisen with regards to this principle in at least 2 of the quadrants (leadership, employees, costs and the market) The issue affects a large majority of the employee population or a critical segment There is some misalignment between current state and the guiding principle An issue has arisen with regards to this principle in at least 1 of the quadrants (leadership, employees, costs and the market) The issue affects at least 25% of the employee population There is a general alignment between current state and the guiding principle No major issues have arisen in any of the quadrants (leadership, employees, costs and the market) The issue affects a small proportion of the employee population

Assessment of state of current Total Rewards Example output = broadly working well. No immediate action required = major improvements can be made = action needed = already being addressed in HR policy Assessment of state of current Total Rewards Example output Total Reward element Guiding principles (what rewards should be doing) Market competitive Aligns Total Rewards with performance Clear and understood by employees Attract, retain and motivate employees Support corporate behaviours Supports business goals Fixed pay No issues identified Good correlation with performance Reasons for increase unclear to employees Not a reason for joining Nestlé n/a No differentiation of rewards in key segments Variable pay Slightly below market in some grades Some correlation with performance Feel that this is well communicated Bonuses paid irrespective of behavior High differentiation in key segments Benefits A feeling that these are well below market High level of understanding Play a small part in attraction & retention Benefits cost too high Growth No alignment with performance Opportunities not well communicated Big attraction to Nestlé No link identified Performance goals aligned to strategy Work-life Some key segments affected by gaps

Assessment of state of current Total Rewards Template = broadly working well. No immediate action required = major improvements can be made = action needed = already being addressed in HR policy Assessment of state of current Total Rewards Template Copy and paste these circles to fill in your template Total Reward element Guiding principles (what rewards should be doing) Market competitive Aligns Total Rewards with performance Clear and understood by employees Attract, retain and motivate employees Support corporate behaviours Supports business goals Fixed pay Variable pay Benefits Growth Work-life