While employee compensation has always been more important, it may be even more so in 2023.
The popularity of remote work means employees have greater optionality than ever before in where they choose to work. And, because of this, they have higher expectations of their employers.
If you want to attract and retain top talent to your company, you need to take a proactive approach to compensation.
In 2023, compensation is more than just looking at salaries and benefits—it also supports your company’s image and reputation by turning employees into ambassadors.
Here’s why proper compensation is so crucial today plus six considerations to explore in your next compensation analysis.
What’s Changed in the Post-Pandemic Job Market?
Salary, benefits, and perks have always been deciding factors for job-seekers, but the pandemic and subsequent shift to remote work have put them all under a microscope.
Why?
Because remote work gives employees options.
If a job just requires a computer and internet connection, people can start looking for work beyond their geographical area.
This puts more power in employees’ hands and forces employers to seek new ways to attract and retain talent.
There’ve been a variety of studies and reports over the last few years that unpack this phenomenon. Notable trends include:
- Remote work is at an all-time high: Around 20% of all labor in the states may be satisfied by remote workers (up from 5% pre-pandemic) and 80% of surveyed remote-capable employees are working at least part-time at home.
- Employees are seeking jobs that allow remote and hybrid work: 60% of remote-capable employees are “extremely likely to change companies” if not offered remote flexibility. Another study found that nearly half of surveyed employees were looking for a post-pandemic career change, a phenomenon dubbed “the Great Resignation.”
- The labor force has been disrupted: 47 million employees quit their jobs in 2021, many of which shifted to other industries. This workplace “reshuffle” has led to significant labor shortages, retention issues, and talent wars in many industries.
This data paints a picture of employees who have options in a disrupted workplace, which requires employers to step up and make changes to keep their organizations afloat.
More than a Salary: Why Compensation Matters
Given this context, attracting and retaining employees should be top-of-mind for any company.
And, one of the first places to start is with a thorough compensation analysis to ensure that you’re paying your people fairly.
Fair and generous compensation is part of your company’s employee value proposition—the reason employees want to work for you.
Regularly reviewing your compensation plan will help make sure you are competing effectively in the market and setting your company up for success.
tBesides talent acquisition, there are two other reasons why it’s important to compensate employees fairly:
- Employee engagement and performance: Team members will be more highly engaged in their work when they are satisfied with their compensation. And, engaged employees perform better—it’s a win-win!
- Reputation: Fair compensation helps turn employees into ambassadors for your company. Your employees can be one of your biggest word-of-mouth recruitment tools and help your company build a strong reputation.
A fair compensation package shows care for your employees, promotes engagement and performance, builds reputation, and keeps you competitive in the marketplace.
How to Perform a Compensation Analysis
Proactive attention to compensation ensures you’re getting ahead of employee dissatisfaction. If you’re reactive and only making changes in response to the industry or your competitors, you’re too late.
A forward-thinking approach will signal to your employees that you value them. By regularly reviewing and adjusting your employees’ remuneration packages, you ensure their compensation aligns with their expectations, expertise, and contributions to the company.
Here are six factors to consider in your next compensation analysis:
1. Salary
This is often the most obvious and important part of a total compensation package. Salary range is impacted by factors such as:
- Qualifications and skills
- Tenure or time with the company
- Inflation and cost of living
- Market competition
- Performance
Take time to evaluate your current salary ranges to make sure they are aligned with these factors.
Note current trends, too. For example, a survey of HR professionals shows that 2023 is expected to be a “banner year” for salary increases thanks to record-high inflation and talent wars. If you’re not keeping up, you’re falling behind.
You also want to consider how it stacks up to industry norms and other companies and competitors in your geographic area.
2. Benefits
In addition to salary, benefits are also a significant component of an employee’s overall compensation package.
This may include things like:
- Medical, dental, or vision insurance
- Retirement savings plans
- Education and professional development funds
- Parental leave benefits and child care assistance
- Wellness programs
- Life insurance
- Employee ownership plans
An important thing to consider here is if your benefits align with what your employees need and want.
Do an audit of what benefits are claimed or left untouched to get an idea of what’s needed. You can also consider surveying your team for input or discussing this in an employee check-in meeting to understand what benefits are most valuable to them.
3. Paid Time Off
Paid time off (PTO) is a significant part of a total compensation package. PTO policies include:
- Paid vacation time
- Sick leave policy
- Personal days
- Bereavement, caretaking, or other types of leave
In your compensation analysis, consider not only how many days are allotted to PTO, but how they are accrued and distributed.
For example, vacation days can be accrued based on time working, or given in full at the beginning of the year. Then, at the end of the year, they can be rolled over, paid out, or lost if they’re not used.
4. Work-From-Home Policies
In our post-pandemic workplace, work-from-home (WFH) and hybrid schedules have become the norm. And, with that, there’s a need for companies to implement and clarify policies around it.
These policies are part of your compensation analysis, because they may be an attractive perk and benefit to potential candidates.
Here are some things to consider for your WFH/remote-work policy:
- Which positions are eligible for WFH or remote work?
- What are the expectations around work hours and location?
- What tools will you use to communicate as a team?
- How will you evaluate if the system is working?
5. Workspace
Even if your team is 100% remote, fully in-person, or operating on a hybrid model, you want to consider your workspace as part of your compensation analysis.
Physical workspace might include your employees’ home, the company office, coworking space, or a private office in a flexible workspace.
A workspace can add a lot of value to the employee experience for a few reasons:
- Tools and resources: Does your team have what they need to do their job?
- Community and collaboration: Bringing people together in-person boosts team morale and builds a sense of belonging. Even remote teams can take advantage of in-person collaboration by using bookable meeting rooms for occasional all-team meetings.
- Focus and productivity: Some workspaces are conducive to deep work and others aren’t. Flexible office spaces like a coworking space offer spatial variability—a mix of meeting rooms, collaborative areas, lounges, private spaces, and more—so employees can choose what works best.
- Amenities and perks: Workspaces can come with “extras” like gyms, food options, events, on-site staff, tech support, virtual office services, and more.
In 2023, your workplace should be focused on enhancing people’s lives. After all, they have the option to work remotely, so what’s the value-add of a physical workspace? It’s important to create a space they want to be in, not somewhere they’re forced to go.
So, in your compensation analysis, consider how the workplace is contributing to overall employee well-being and what steps you can take to improve it.
6. Perks
Finally, consider perks as part of your overall compensation plan.
It’s important to note that perks like free food or a gym membership cannot replace a fair and equitable salary, but it can be something extra that helps attract and retain talent.
Some popular perks include:
- Company discounts
- Free food
- Recognition and appreciation gifts
- Home office budget
- Wellness programs or gym memberships
- Events and activities
In 2023, employees have higher expectations of their employers because they have more options than ever before. So, organizations need to be proactive in ensuring they’re compensating their teams properly.
A thorough compensation analysis that looks into these six areas can help set you up to attract and retain the right talent for 2023 and beyond.
If you’re in search of a workspace that will turn your workspace into a value-add for your employees, book a tour of your local Launch Workplace today.
