Adapt your compensation strategy to keep up with worker expectations

There are significant trends shaping the workforce of 2020 and beyond. As such, to become or remain an employer of choice, businesses must make some adjustments to compensation to meet the needs and expectations of this workforce of the future.

There are four major trends that will impact employment in 2020 — in fact, they already are. These include:

1. Multiple generations in the workforce: Four generations in the workforce require a different approach.
2. Consumerization of the workplace: Employees today view their employment the same way they view their use of technology. They also feel more entitled to jobs, projects and experiences that are tailored in ways that they (as consumers) find personally meaningful.
3. A growing gig economy: Not that all employees will become contract employees but demands for flexible scheduling, combined with making freelancing their primary gig to benefit from increased flexibility, autonomy, cash, and professional development opportunities.
4. Ever-evolving jobs: Roles continue to change and therefore, job functions are often combined, and multiple roles are prevalent.

Potential solutions

There are many ways to address the changing expectations of today’s workforce, but some that  will most likely get the best results include:

• Mix and match: Knowing that multiple generations are in your workforce, it is important that you take the time to understand what each segment of your workforce wants, so you can develop personalized employee value propositions for your core workers. In addition, give your employees the ability to choose from a menu of options, provided they do not interfere with operations and remain cost-effective and compliant. For example, it may be practical to offer various total compensation packages that provide an attractive array of benefit choices. These programs are structured in a way to be reflective of your current and future workforces.
• Reward performance: Rewarding high achievers with cash, benefits, and learning and development opportunities are the best ways to retain talented workers — especially younger ones who are eager for more of everything (pay, opportunities, better titles, etc.). When designing these programs, offerings must be aligned with the overall company strategy and goals, while including a line-of-site for employees. If your employees cannot see how their contributions help to achieve company goals, then they will unlikely remain interested and engaged in achieving them. There must also be some form of a weighting towards individual accomplishments instead of or in addition to team goals.
• Reward people more frequently: In a world where tenure is declining across many industries and top performers have many options, organizations are rethinking when and how often they reward employees. Those employees with lower wages are more appreciative of employers providing meaningful benefits on a very frequent basis. As employees move up in an organization, the timing of the reward distribution can be delayed to a longer period and/or include some type of holdback of the total award to a much later period. For example, 50% of the award earned for the first month can be paid immediately, and the remainder paid after the close of the company’s fiscal year.
• Maintain an agile pay structure: In today’s highly volatile market, having a compensation structure that can easily weather changes is necessary. If a pay structure is too rigid, it may take away some of the judgment from the equation of setting compensation. However, fewer objective factors could lead to the company exposing itself to a variety of pay equity issues — both internal to external. The agile nature is a factor of the new jobs and how to compensate adequately of the slash type position where certain functions and roles are combined when before they most likely were two separate positions.
• Talk about pay rationale with employees: Workers of the future will expect more open and honest communication about all matters of the business, including how pay decisions are made. A solid total compensation platform will assist in answering the question of why certain actions are taken. While at times, employees may not like answers, they should at least understand and appreciate that a well-thought process does, in fact, exist.
• Provide learning and development opportunities: Development and advancement do not have to be about promotions. It could mean new assignments, cross-team projects, attending conferences, education reimbursement or mentorship programs.
• Develop meaningful benefits for gig workers: If your organization is using part-time, gig workers, independent contractors or freelancers, create alternate benefit structures specifically for them. Even gig workers need some type of benefits. The new health reimbursement account plans may be ideal for these classes of employees.
• Incorporate a career ladder: From a best practices view, creating a career ladder to be part of a salary band or salary grade structure is a meaningful way to set forth expectations. As such, clearly demonstrating the necessary criteria to be hired and later promoted with a corresponding salary structure is worth creating and implementing. This will then deliver a matching pay strategy with employer strategy.
• Adopt a longer-term focus: Companies drive mixed messages from an operational and long-term retention perspective when too much focus is placed on the annual merry-go-round tactics associated with tinkering with short-term cost savings. For example, consider moving away from the constant adjustments to premium contributions, deductibles, co-payments, for healthcare, and the stale practice of across-the-board standard wage increases.

Risk of complacency

When viewing this issue from a risk perspective, maintaining the status quo would appear to be a decision fraught with exposure. If you fail to attract and retain talent, you will not have adequate resources to meet your strategic objectives.

It is necessary to create a different strategic plan for total compensation to parallel the business strategy, and starting with incremental action plans to address the issues described above should permit the opportunity to explore the possibilities to be different, as status-quo will not suffice.

Elliot Dinkin is president and CEO at Cowden Associates Inc., specializing in helping corporate clients find the best solutions, both for the enterprise and its employees, with regard to compensation, health care benefits, retirement and pension issues, and Taft-Hartley fund consulting. The views expressed here are the author’s own. 

Related:

• Here’s what employers should know to keep up with employee expectations
• What the gig economy means to insurance
• Insurers have ‘some way to go’ to adapt to sharing economy