If there’s one thing that has stayed consistent over the past few years, it’s change. At this point, HR teams know to expect the unexpected –– and the looming economic downturn is no exception.
Still, even with inflation rates peaking, employees expectations’ are higher than ever, which puts companies in a difficult position when it comes to compensation. So, how can employers respond to macro-level changes while making employees feel valued and retaining talent? The key is in changing the way we think about pay.
The challenge: rebuilding value
With the shift to hybrid and remote work, many of the tangible benefits of sharing an office space are lost. Along with fostering a sense of community, offices were a way for companies to stay competitive by providing value to employees beyond their paychecks. With the loss of this aspect of work, things like compensation carry much more weight in employees’ decisions to stay committed or seek other opportunities. Lattice recently found that salary is the number one reason UK-based employees leave their current roles, with over a quarter of employees who quit during the pandemic stating the primary reason was because they found better pay elsewhere.
So, what do those tangible benefits that in-office working provided look like now? How can HR teams remotely manifest a sense of belonging, community, and commitment that money can’t buy?
The shift: thinking holistically
There’s no denying that pay is a huge component in what attracts and retains employees. While this can make compensation strategy feel like an uphill battle during this period of change, it’s also an opportunity to reshape benefits to play a larger role in what is typically a cash-centric negotiation.
HR teams should start by questioning why people are seeking higher salaries. If they are hoping to achieve a certain lifestyle – what are the specific benchmarks they’re aiming for? If they are seeking a greater sense of security, what elements would make them feel safe both professionally and personally?
By understanding what drives employees to pursue higher pay, companies can come up with dynamic compensation solutions to meet their needs in a more holistic way. This approach to building employee value propositions, also known as “Total Rewards,” is the key to attracting and retaining talent in a post-pandemic world. But in order for it to be effective, businesses and People leaders need to embrace the mindset that a meaningful and healthy work culture can ultimately win out on high pay.
The takeaway: acting intentionally
Address total well-being
As the world braces for the impact of a potential recession, chances are that your organisation is already taking a second look at its budget and thinking about ways to stretch it further. If companies want to get ahead of the curve and meet employee expectations, it’s crucial that they significantly evolve the way they think about compensation strategies. Rather than focusing on salary alone, businesses should be thinking in terms of total rewards by building holistic solutions that include benefits, development opportunities, and flexible work options for employees.
Total rewards packages address a range of employee needs by incorporating things like learning & development stipends, mental health support, wellness memberships, team offsites, sabbaticals, and enhanced leave options into the overall compensation strategy. They can also include employee-specific things like home office set-up bonuses for remote or hybrid employees, personal finance planning for early professionals, and caregiving resources for parents and caretakers.
Be selective with priorities
With the number of times HR teams have had to pivot and adapt in the past year alone, it can be hard to gauge exactly how much change is the right amount of change. As People professionals, it’s tempting to advocate for every employee request that comes our way. But it’s also important to recognize that keeping your people happy isn’t about investing time and resources in every area equally –– it’s about taking a thoughtful, tailored approach to understand what your employees truly need.
Gathering employee feedback is a crucial step in building a total rewards package that actually does the job of retaining talent. Conducting surveys is the surest way to understand what employees really think about their salaries, benefits, and other perks. Not only do they help HR teams identify mission-critical benefits that employees have come to rely on, but they also empower businesses to make thoughtful and deliberate investment decisions on what will move the needle most.
Communicate with care
The changes you make in response to this moment are far more than a spreadsheet exercise. This is why regardless of your compensation approach, ensuring you are clearly and thoughtfully communicating around it is such a key piece of the puzzle.
In order to make meaningful change, companies need to eliminate the stigma of talking about compensation openly. Proactively talking about compensation is now the new normal, especially as different compensation packages are widely available in the public domain.
At the end of the day, compensation – and how we are rewarded for our work – is tied to how we ultimately judge our self worth and value. And not feeling valued remains one of the top reasons employees leave companies, regardless of how the market or the economy is doing. Make sure you recognize, and validate, the personal part of pay – while still making strategic, data-backed decisions in setting your approach.
Bring openness and transparency into pay discussions
Employees are gathering data from crowd-sourced websites and are increasingly likely to openly discuss compensation with their friends and colleagues. Pay transparency laws are also picking up steam in the US and in the UK, impacting some of the biggest metros for recruiting talent, and our own research has also found that 67% of UK employees agree organisations need to be more transparent around pay policies. Within that context, it’s critical to proactively communicate your philosophy and processes around compensation. Help your employees understand why your company approaches compensation the way you do and how their pay is being determined in relation to that philosophy.
The Great Reshuffle is not going to be resolved solely by employers ramping up cash salaries for employees: It’s up to People leaders to give employees a reason to stay beyond the number on their paycheck.
By actively seeking out and listening to employees’ input, HR teams can not only make compensation decisions more value-driven, but they can ultimately build a better company culture and ethos of openness.