In recent years, there has been a notable shift in the way companies approach pay strategies due to remote work and inflation. As a result of these changes, pay inequities and compensation inconsistencies have become apparent in many organizations. This article examines the limitations of standard pay bands and performance-based pay models, the importance of fairness, transparency, inflation, and systemic approaches to corporate compensation, and the need for a new model of “systemic rewards.” It also explores why companies are still struggling to meet the goal of pay equity, despite pay being the number one concern for workers globally.
The traditional pay models that companies have been using for years are no longer sufficient. Standard pay bands and performance-based pay models have limitations that make it challenging for companies to address pay inequities and inconsistencies. These pay models do not consider factors such as inflation and how they impact the cost of living, particularly in different geographical locations. Additionally, traditional performance-based pay models can often be biased and overlook the unique contributions of employees who may not fit into a predetermined performance metric.
Corporate Compensation Considerations
To address pay inequities and inconsistencies, companies must consider fairness, transparency, inflation, and systemic approaches to corporate compensation. A systemic approach emphasizes the use of reward systems that are integrated with business goals and aligned with the company culture. Such an approach enables companies to recognize the contributions of all employees and create compensation packages that reflect their respective roles.
Pay Ranks High in Employee Concerns
According to Kathi Enderes, a global industry analyst and senior vice president of research for The Josh Bersin Co., pay is now the number one concern for workers around the world. Additionally, pay and rewards have become the top drivers of employee experience, and approximately 44% of employees believe they are underpaid. Companies must recognize that perceptions of underpayment contribute to low employee morale, which can lead to low job satisfaction and increased employee turnover.
Employee Perception of Underpayment
The dissatisfaction of employees regarding their pay is a growing concern. The majority of surveyed employees report feeling undervalued, with various factors contributing to this feeling. One contributing factor is insufficient in-work benefits that make up 32% of payroll and no longer meet employee demands for inflation-adjusted pay. To address this, companies need to ensure that their compensation packages and benefits are competitive and aligned with their employees’ needs.
Companies and Pay Equity
Despite the widely recognized importance of pay equity in retaining employees, only 9% of companies effectively address pay equity issues. Companies need to recognize that pay equity is essential to ensure that all employees within the organization are compensated fairly. This problem has persisted even as companies actively try to communicate about and educate employees on pay equity issues.
Systemic Rewards as a New HR Model
According to the report, HR departments should consider adopting a new model of “systemic rewards” rather than “total rewards.” The systemic rewards model emphasizes compensation strategies that align with business goals and objectives, encompassing both tangible and intangible rewards. This approach also considers the effects of external factors such as inflation, globalization, and technological advancements on employee compensation.
Meeting the Goal of Pay Equity
Despite emphasizing the importance of pay equity, companies are still struggling to achieve fair compensation. Clear communication about pay equity is critical for employee retention, and companies must be transparent about their pay policies. They must also be willing to adjust their policies to reflect employees’ changing needs and compensation expectations.
Focused Company Compensation Strategies
Organizations should have a focused compensation strategy based on solid data and the latest best practices. This strategy must take into account employee needs and provide for regular assessments to adjust compensation packages as the market changes. Companies must also be willing to use robust data sets, including data analytics, to ensure that pay decisions align with business goals and objectives.
In conclusion, companies must recognize the importance of fair and equitable compensation in retaining their employees. A systematic approach to pay equity and rewards is necessary, and companies must be willing to adjust their pay strategies to reflect employee needs. They must also be transparent in their communication about pay equity issues so that employees can trust that they are being compensated fairly. Finally, companies should take a focused approach to their compensation strategies, leveraging recent data and best practices to align compensation packages with their business goals and employee needs. Ultimately, companies that value and prioritize pay equity will undoubtedly enjoy the benefits of employee retention, enhanced job satisfaction, and a more productive workforce.