Employee compensation has been a hot topic of discussion as people work for each other. In other words, someone wanted to receive more and someone wanted to pay less from the beginning of the trade. It might seem hyperbolic, then, to say that employee compensation is particularly important today. According to the Economic Policy Institute, there are huge disparities in employee pay today.
Some of the more obvious discrepancies run along racial and gender lines. These are well known and documented for a long time. But there has been another trend over the past four decades in the United States: the widening gap between how much is earned by the highest-paid workers and everyone else.
While many have said this has been a problem for years, we are now really starting to see the fruits of these misguided labors. Due to the COVID-19 pandemic, labor shortages have become an increasingly frequent phenomenon as many workers have determined that the risk-reward of their job simply doesn’t make sense. These and other factors are why it’s time to rethink employee compensation.
Why It’s Time to Rethink Employee Compensation
When considering employee rewards, such as pay, from an employer’s point of view, it can be easy to justify certain assumptions – especially when they fit well with the bottom line. Some will even say that certain low-skilled positions are paid too much to do what is seen as “easy”. When faced with the reality check questions of “Would you do this job for this level of pay?” or “If this is really a great show, why don’t you do it?” many will run away.
The importance of rethinking employee compensation, however, doesn’t just apply to those in lower-wage or entry-level jobs. It is also critical for those who are at the senior level as well. To illustrate this point, tech giant Apple recently awarded some of its top-performing engineers bonuses of up to $180,000. They didn’t just do it to see how much they appreciate their team; they did it because other companies, like Meta, are robbing their employees with more enticing offers.
As you can see, there are several strong motivations for rethinking employee compensation. But what goes into employee compensation, and how can companies keep their workforce satisfied?
What constitutes employee compensation?
In the past, employee compensation was synonymous with one thing: their paycheck. This has changed, however, as employee preferences and workplace cultures have evolved over time. An example of this is the growing breadth of desires employees have when it comes to full benefit plans.
People in a full-time position will naturally expect things like health care as a benefit. But this is really just the tip of the iceberg. Does your organization offer people choices in how they build their health plans? Do you have benefits like health care, extra vacations or other perks? These are the types of diversified compensation packages that are appealing to employees today. Simply assuming that the previous status quo will do will not be enough for the best talent.
How should companies adopt new compensation plans?
So now that you see some of the motivations for rethinking employee compensation, it’s time to put those principles into practice. Probably the best way to renew employee compensation is to partner with a consulting firm with experience in this area. A consulting group can help you achieve total compensation goals in a few ways:
– Building a strategy from the ground up – Leveraging past knowledge with data from your company’s workforce, a consulting firm can figure out exactly what priorities need to be addressed in compensation packages.
– Give people more freedom as they become more agile – Relying on remote and other unorthodox work models can pay dividends for organizations and employees. Many people prefer to be completely remote, while others like to have some sort of hybrid setup. In any case, companies that were already using remote and hybrid models were much better prepared for the challenges posed by COVID-19.
– Happier employees work better – Nobody wants to do their best when they don’t feel appreciated and aren’t particularly enthusiastic about their pay. Finding the right incentives for each employee will build a stronger culture and more loyalty.
It is a mistake for organizations to continue building total compensation plans as they have in the past. Times have changed and employee rewards need to change with them.
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