Seventy-three percent of employers say their people are fairly compensated, but only 36% of employees would agree. And because things have changed significantly over the past few years when it comes to how we work, people now expect more from compensation packages than money alone.
Mental health benefits, 401K plans, equity, flexible work hours, and home-office stipends are just a few of the benefits that top companies offer employees. Considering all of these benefits (and more) help organizations create competitive compensation packages.
Therefore, a compensation strategy is essential to attract and retain talent, and understand exactly why that’s the case can help you create an appealing strategy for your organization.
Compensation planning means developing a compensation strategy that supports your business strategy, operating objectives, and employee needs. Your compensation plan should include salaries, benefits, and incentives, as well as pay-band details, development levels, and when and how employees are eligible for raises and bonuses.
Compensation isn’t just the amount in your offer letter or paycheck. Instead, it consist of a variety of elements, including:
Creating a new compensation plan can be daunting, especially if you don’t have a large budget for salary increases. So although 76% of people say pay is their top priority when considering a job, never fear. While you should pay people what they’re worth, offering top pay isn’t the only way to attract talent and keep your current workforce happy.
Remember that your company culture also attracts talent. Lucy Bell, Talent Acquisition and Workforce Planning at Headspace Health, explains that the past few years have provided people with “a frank reflection on how and in what ways people want to show up in their lives.” Many candidates are now looking for what she calls “the intangibles:” leadership transparency, modeled company values, mental health benefits, and positive relationships.
Barry Marshall, CEO and Founding Partner of P5 Collaborative Consulting, agrees, noting that “financial compensation is never the driver for employee satisfaction.” Instead, he says, unseen benefits – like relationships with managers or increasing representation at all levels – are what really make people champions for your organization.
Here’s 4 steps to make it happen
So if you don’t have the budget for highly competitive salaries, but still want to support your people and their efforts, consider tying your values to your rewards. An example of doing so is Digital Ocean, which rewards top employees with gifts such as Kindles loaded with their CEO’s favorite books. And over at ChartHop, managers gift team members Blueboard rewards for earning Quarterly Value Awards or hitting work milestones.
Wondering why you should create a compensation plan, even if you’re not actively hiring? Below are four benefits of how compensation plans specifically help you succeed, no matter the size or status of your organization.
Everyone likes to feel good about the work they do…but a pat on the back shouldn’t be your people’s only motivator. A detailed compensation plan further motivates employees to achieve their goals. That’s because strong compensation plans:
By improving employee motivation, you’re also most likely increasing their engagement. And we all know the benefits of having highly engaged employees: organizations experience a 20% increase in sales and 21% greater profitability.
The right people operations platform provides employee self-serve access to their information. No more contacting your manager to send your OKRs or HR to review your compensation band.
You’re looking to hire and decide to bump up your compensation to attract top talent. That’s a good decision, right? Maybe not. If you change the pay for new hires, but not for employees already in a similar position, you might struggle to retain your current workforce.
This issue is pretty common, says Insider, as they report salaries for new hires are 7% higher, on average, than the median pay for similar roles. Therefore, if you’re adjusting your compensation strategy, make sure you’re giving your current workforce some love, too, as salary discrepancies between new hires and existing employees can often be an issue for organizations.
To combat voluntary turnover, consider:
Culture is a make-or-break consideration for a lot of people. So if you’re looking to strengthen your people-first culture, there’s no better place to start than your compensation strategy.
Mike Metzger, President & CEO at PayScale, explains: “Compensation policies reflect the culture at the organization. Employers who pay fairly for competitive positions and foster open dialogue around pay will build more trusting relationships with their employees that, in turn, will impact the bottom line.”
Besides creating an equitable compensation plan (which is no small feat), make sure you use surveys to determine what people want. Instead of establishing general benefits that you think your employees want, it’s best practice to gather feedback to develop your compensation plan. My Doan Cong, VP of People ALT, used a wellness survey to focus on the mental, financial, physical, and emotional health of employees. The result? Learning that employees needed help boosting their financial health – and ALT creating the resources to do so.
Check out the 2022 pioneers here
If you truly want to work on improving your DEIB strategy, look at your compensation plan. By creating one with equity in mind, you’ll help reduce wage gaps between different demographics and ensure fairness in hiring and promotion decisions.
One of the easiest ways to view your people data across categories and demographics is in a people operations platform. By slicing and dicing your data, you can spot any trends and opportunities for improvement to ensure people in the same role and level are receiving equitable compensation for their responsibilities. Ultimately, it’s important to have a strong, clear, and fair compensation strategy to create a more desirable and equitable workplace.
Strong compensation plans positively impact your people, company, and ultimately, your bottom line. So if you’re ready to jump in and begin creating a plan to attract and retain talent, look no further than the resources below.
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