Trends in Compensation and Total Rewards

Is it all about the money?

Well, according to Forbes, money does buy happiness. While the link between income and happiness is real, it’s modest and conditional. Happiness is complex and involves various factors – money is just one of them. So, as you build your total rewards program, compensation is important, but so are the benefits you offer.

Compensation Philosophies

Let’s start with pay. Your organization should have a compensation philosophy, or a formal statement documenting the company’s position about employee compensation. There are three main strategies:

• Leading, or paying employees more than the market rate
• Meeting, or paying employees the going market rate
• Lagging, or paying employees below the market rate

Lagging may not sound very attractive, but it may be necessary if money is tight. Know that it may lead to lower employee performance and higher turnover. If this is your strategy, consider investing in non-pay perks like flex time, remote work, childcare assistance, free gym memberships, etc. that can help you attract employees and may cost less than increasing compensation.

Data drives decisions, so regularly review your salary ranges and internal equity. You might subscribe to salary surveys, pay for compensation tools, or hire a third party who can look at several compensation platforms for you. Be cautious of self-reported data as it may not be accurate or keeping pace with the market.

Traditional and Trending Benefits

Benefits are an important factor as you strive to attract and retain employees. Workers may expect traditional benefits like healthcare, dental, vision, life insurance, retirement savings, disability, and maternity, military, medical, and disability leaves.

Trendy benefits that can help you differentiate yourself and appeal to employees include:

• Flexible and part-time work
• Four-day work weeks, summer Fridays, nine-day fortnights, etc.
• Lifestyle Spending Accounts (LSAs), which employees can spend on eligible expenses like wellness, mental health, professional development, childcare, food, etc.
• Individual Coverage Health Reimbursement Arrangements (ICHRAs), or set budgets for employees to shop on the market for health insurance
• Reproductive and menopause benefits
• Telemedicine
• Childcare
• Financial wellness
• Mental health benefits and leave
• Paternity/baby bonding leave
• Elder care leave
• Sabbaticals
• Bereavement leave that doesn’t specify which relationships warrant days off

Whatever you choose to include in your total rewards package, the focus on the employee as a whole person is here to stay. Organizations are looking at social determinants of health like housing, nutrition, transportation, education access, equity-based initiatives, financial literacy, mental health, and more. These are investments that can boost organizational output and reduce the onset of costly health conditions. We’re not robots, and neither are our employees!

 If you need help creating your compensation and total rewards philosophies, reach out to Purple Ink!