Total Compensation has taken over discussions in most company leadership meetings. Salaries have become more complicated as competitive wages are changing faster than ever before. Other benefits — from traditional offerings to greater workplace flexibility to innovative and new ways of rewarding employees — are on the table as well. In a talent-friendly market, employers are getting creative.
Based on MRA’s recent CompTrends Survey, companies project higher than normal base pay increases in the coming year. We are also seeing an increase of 4% across all employee groups in the next 12 months. That is a rather significant increase from the average 3% increase that has been the norm for the past 3-5 years.
However, salary is just part of the equation and the key question in the overall compensation conversation is: “What are companies doing to recruit and retain employees?”
Faced with talent shortages, organizations found success filling open positions by offering higher wages to new hires. However, this change in compensation unintentionally created a situation where experience, seniority and skill does not differentiate pay among employees. As a result, it is anticipated that many employers will be re-evaluating their compensation structure in the future to ensure they are rewarding employees appropriately.
Based on discussions heard from Quad Cities business leaders, they are dealing with pay compression as a new challenge for their organization. In the survey, 69% of employers strongly agree/agree that it has affected their compensation strategy.
I would also caution that compression has a direct impact on employee morale. Performing a compensation analysis or updating salary ranges to help identify and get ahead of compression is strongly recommended.
While base pay may help attract talent, Total Compensation is a significant factor in fostering an employee’s commitment. Organizations must find ways to bolster total rewards beyond base pay. One of the most common solutions is variable or incentive pay, but companies should also consider health benefits, Paid Time Off (PTO), and 401(k)s.
In addition, inflation has created new concerns. Employers report that over half of office, technical and service, and production and maintenance employees feel that compensation is not keeping up with inflation.
In response, organizations have:
- Increased starting rates (80%)
- Increased standard wages (73%)
- Uploaded wage structures or pay ranges (52%)
Traditional benefits and compensation strategies are no longer enough to meet the demands of today’s workers. Employees also need to be made aware of their total rewards as compensation encompasses more than just base pay.
Providing a total picture of an employee’s value to the organization can be invaluable to retaining employees. We are seeing more employers offering benefits that match up with an employee’s life/work balance. That might include remote work, flexible hours, additional PTO, and variable shift options.
Jim Morgan is vice president, Business Development & Workforce Strategies at MRA — The Management Association. He can be reached at James.Morgan@mranet.org.