The new compensation strategy: Be more creative
Work is changing, and your compensation strategy should, too. Be fluid, creative, and leverage data. Ceridian’s senior product manager John Whyte shares factors for HR leaders to consider when evolving their compensation strategies.
The world of work is changing, as are employee expectations, and compensation needs to reflect that to be both fair and impactful.
The old-world approach to compensation would typically include an annual merit increase – and perhaps an annual bonus – based on a rigid budget.
Today, HR leaders need to be more fluid and creative with their compensation strategies, and take factors like timely rewards and pay equity into account. Armed with modern human capital management technology, they can help managers leverage data and insights to factor in things they traditionally may not have in the past. The result is smarter, more impactful and unbiased reward decisions.
Last year, Ceridian surveyed a sample of its customers to identify the greatest pain points that managers encounter in a typical compensation cycle. By far the most frequent response, 51% of managers stated that they don’t have enough information to feel good about the merit or bonus recommendations they are making for their employees.
From a leadership standpoint, consider the following questions as a starting point when thinking about how you approach compensation today:
- What is important to your people?
- What are the engagement drivers?
- How do you empower managers to facilitate the process?
Here are four factors things to think about to successfully evolve your compensation strategy.
Bonuses and spot rewards
Salary increases compound over the years, while bonuses are one-time rewards that fuel total compensation without creating a long-term impact on budgets. Bonuses don’t only have to come in the form of fixed annual or semi-annual cycles. They can be spot rewards for completing a project or achieving a specific goal. These types of bonuses can energise employees in a timely fashion without bloating the salary budget for years to come.
Budgets are tight, and we can’t always give our high-performing employees the financial rewards that we wish we could. The good news is, employees are placing greater value than ever on less tangible forms of job satisfaction.
For example, Gallup reports that employees who feel they are being developed and not just managed are over three times more likely to be engaged in their jobs. This opens the door for well thought-out career development plans and training opportunities that may yield greater benefits down the line than nominal pay increases do in the short term.
On Jan. 1, 2018, Iceland became the first country to require companies with 25 or more employees to prove that they are not paying women less than men for the same job. While not always codified into law, efforts to close the gender pay gap are accelerating worldwide.
Last month, Starbucks announced that it had achieved 100% pay equity by gender and by race in the U.S. and is working to do the same worldwide. A push towards pay equity is a powerful tool in building an employment brand and attracting top talent worldwide.
Empowering managers with the right tools and information
Managers are busy. A merit or bonus cycle is yet another task piled on top of endless job responsibilities and is an uncomfortable process for many. In addition, it is a process that managers may undertake once or twice a year, so they are often not comfortable with the tools used to make pay adjustments for their teams.
As noted earlier, it’s important to organizational success to provide managers with the information they need to feel good about compensation recommendations.
Compensation tools must provide managers with relevant and easily accessible data, while focusing in on employees who need attention based on factors like performance, position in pay range, and flight risk.
Evolving your compensation strategy reflects relevance in the changing world of work. Taking these factors into account and leveraging data to make more informed decisions results in a more engaged workforce, and a competitive advantage.