4 Ways to Make Your Compensation Strategy More Competitive
/At this point, you’ve likely completed your annual review or you might be ready to kick off your mid-year review process. Meanwhile your company is probably dealing with pressures from employees to review salaries more frequently, all while you may also have had to deal with some company-wide layoffs to re-focus the organization. It’s a wild time, however, it’s also the best time to get prepared!
Consider this your official invitation to take a good look at your current (or non-existent) salary structure, iterate on your processes and plan ahead. Here are some things to consider as you get going:
Market reviews need to happen more frequently
Employers used to be able to do market reviews once a year (or even less) and keep pace with the competition and market movements. That’s not the case anymore. The market is moving very quickly so many companies are now conducting market reviews at least twice a year. Doing two market reviews a year cascades into the possibility of two market-based salary adjustments and ensures you stay on top of market developments - no matter if there is an upwards or downwards trend. Performance-based salary adjustments can remain an annual process for now.
Compensation budgets need to increase
The days of being able to offer an annual 3% merit-based increase are behind us. With the market moving so rapidly, that modest bump can easily be eaten up by market adjustments without room to even consider any performance-related increases. We are also seeing some companies looking at creative ways to combat inflation without necessarily impacting their salary structures. Stipends and allowances seem to be some popular options. All of this additional spending needs to be planned for so that the necessary increases can be integrated into upcoming budgets.
Pay must be more transparent
The proliferation of free, publicly available salary data that employees now have access to can cause challenges for companies without a solid compensation framework in place. The data often lacks context, it can be unreliable and it might lead to unrealistic employee expectations. One way to combat this is by educating employees and being more transparent about your approach to compensation. Focus on clearly articulating:
What your company is rewarding for and what market data are you using.
What your expectations are for each job, what success looks like in that role and what pay range can be expected.
Your career levels, what is required to move laterally or upwards within the organization and how pay is impacted by those moves.
How your organization’s pay compares to similar roles at similar organizations, which helps employees get a more clear picture on the data you use
Support is available - take it!
Creating a compensation philosophy and salary structure often gets rolled into the responsibilities of your HR and/or People Operations team without any additional guidance or training. Instead, consider working with an external resource to guide you in developing and implementing your compensation strategy. We’ve advised People Operations professionals in dozens of growing companies on how to develop, implement and maintain an effective compensation approach. Now is the time to get your ducks in a row for your next compensation cycle. And Talent Collective can help. Learn how here.
