The contract between workers and bosses has changed. Here’s how

Throughout the 21st century, the unwritten contract between employers and their workforce has steadily evolved. Traditionally, businesses’ number-one goal for their contributors has been to retain them. Contributors have been seen as assets working under a transactional Loyalty contract in which pay, benefits, and security were exchanged for time and output, all of which were determined and dictated by the company.

That system was fine, but far from perfect. The need to increase workplace productivity while focusing on employee motivation morphed into an Engagement contract centered on achievement, camaraderie, and meaning. More than ever, employees were considered humans, not just assets to be optimized. In a perfect employer/employee relationship, that meant better pay, better benefits, and a better work experience. Employers had to buy into the notion that employee satisfaction was what retained talent, and a whole industry emerged to measure and drive up engagement levels.

What we saw before the pandemic was a break in this model. Engagement was becoming less and less of a driver of retention, and the pandemic quickened the pace toward what we call the Thrive contract—an employment model anchored in purpose, equity, and impact. Employees demanded a healthier experience in exchange for a commitment to the organization’s renewal. Concerns about equity, skills, and total well-being all took center stage during this period.

Working for the weekend

As we started to rebuild following the years of introspection about work and lockdown frustrations, lifestyle issues were clearly on the rise. Health, well-being, and a greater respect for the whole person are now very much front and center. Mercer’s research now confirms the emergence of a Lifestyle contract, an unspoken agreement about the trade-offs people will make. In 2022, one in three employees said they would sacrifice a pay hike for greater flexibility, one in three would trade additional days off, another 29% would take better benefits, and one in four would trade pay for time to focus on CSR (corporate social responsibility) activity.

In 2022, Citibank hired analysts from the United Kingdom into an office in the south of Spain at half the starting salary that they would earn in London or New York. Interestingly, the chance to live in a warm, sunny locale was not the primary motivator. Instead, the guarantee of not working weekends or more than an eight-hour day during peak periods was what made the deal a swipe-right offer. Respect for people’s lives and enhanced employability in exchange for continued relevance is the new deal. What employees want in return for their time and energy has clearly changed. A just-good-enough paycheck, two weeks of vacation, and taco Tuesdays aren’t enough to mitigate consistently unfulfilling, pressure-filled, 50-hour workweeks. Research by Oliver Wyman shows that Gen Zers (people born between 1997 and 2012) are prioritizing their life and want to contribute in new ways. They want to work for companies that are focused on sustainability and said the opportunity to engage in socially responsible activity would motivate them to stay.

Companies that are already engaging this group—in designing the future of work—are ahead of the curve. In 2023, 69% of companies report they are recognizing the whole person by building a culture where employees feel comfortable bringing their authentic selves to work. And then there’s the issue of actual rewards, as tacitly promised by the phrase Total Rewards. Does the individual who’s in the office three days a week have a better chance at a promotion than a colleague who’s fully remote, even if the latter is just as (or even more) productive? Again, no easy answer, our research findings suggest presenteeism matters. In 2022, 75% of HR worried that those who elected to stay remote would struggle to get promoted and 74% believed their manager would be incentivized to move remote workers onto freelance contracts. Unfettered use of AI in talent decisions may also fuel this bias, as historical data favors full-time, on-site workers. Monitoring this type of adverse impact is partly why advocates demand that tech informs decisions, but does not make hiring or promotional decisions autonomously—a risk when bot delegation is so alluringly time-efficient.

And then there’s the issue of upskilling. In 2022, one in three employees reported that the last time they wanted to learn a new skill, they were deterred by not having enough time during—or even after—work to dedicate to the process, and many just didn’t see the payoff for this personal investment in terms of pay and promotion. So, how can upskilling and training be worked into the Lifestyle contract? This is a relatively huge question because if you live for 100 years, that means you’ll spend about 50 of them working, therefore we’ll need to learn and relearn to support multiple career transitions—if only to keep us all engaged.

The emerging Lifestyle contract is taking a variety of forms depending on where people live, their financial realities, and what they value in life. The key is that it remains unbiased and prioritized around people first—their choices, their connections, and their contributions. Partnering to unpack these needs is an investment in the future of individuals that in the long run will increase retention, bolster job satisfaction, and significantly benefit businesses.

Excerpted with permission from Work Different: 10 Truths for Winning in the People Age (Wiley; November 30, 2023) by Kate Bravery, Ilya Bonic, and Kai Anderson.