Webinar Recap: New Trend Data on the Impact of Compensation
Compensation has become a challenging topic for People leaders, especially in a climate fueled by ongoing talent shortages and rising inflation. A number of companies have responded to these pressures with raises or other financial incentives, while others continue to struggle with the question, What’s actually changed? Has compensation truly become a more potent driver of engagement or intent to stay? Or, in keeping with precedent, do workplace dynamics such as company culture and career advancement still rank higher?
In a recent webinar hosted by Reworked, Hanan Wakeem, a veteran compensation strategist with hrQ, and Perceptyx Research Director Emily Killham revealed the results of new research on the role of compensation within the employee experience and reflected on its findings.
Here are some highlights of their discussion which can be accessed in full here.
Two Perspectives on Compensation
Emily Killham: “We polled 700-plus human resources decision makers across companies of a thousand or more people to find out: what were the compensation strategies that they're using today, and what are they most concerned about. And on the other side, we wanted to hear from individual employees, particularly employees who have recently made a job change, to find out what was keeping them and what wasn't. So we looked at about 2,000 full-time employees in the U.S.
“We shared the key talent management priorities for HR leaders, and we asked them to prioritize these for us. What they said was, our biggest concern right now is just general retention. We have just too many people turning over right now. So that's a big concern for us. The second is backfilling those positions. So how do we refill those positions? Retaining those key talent positions, those high-impact positions was third. And then filling net-new positions really came in at a distant fourth. Leaders are saying at this point, “we need to keep the wheels on the bus, we need to keep things moving.”
Hanan Wakeem: “There's an interesting statistic I'd like to share. It takes more than a 20% pay increase to get an engaged employee to leave an organization, but it takes almost no pay increase, sometimes it's just a lateral move, if I'm feeling disengaged or just not really feeling the love where I am today. And that is reflected in the numbers shown here. There's something that’s beyond comp. So comp obviously from my perspective is huge, but it's not the only factor. Comp is just a piece of the puzzle. What we're seeing in data trends and how folks are responding to these questions is that yeah, comp is important and it might attract me if down the street they're giving me a lot, but it's so much more than that. I need to know that the organization where I am today values me, so that I can be engaged and am much more likely to stay.”
Compensation, Transparency & Building Trust
Emily Killham: “When we think about the general trends we're seeing in compensation right now, two things really became apparent. In the compensation world, HR teams are working to build transparency and to build trust. And this is in the news all the time now with new pay transparency laws and pay equity laws that are coming on the books. But what we found was that in our study about 70% of organizations say, yes, if you ask us what the salary range is for this position, we are happy to tell you. But proactively on the trust side, many are saying, ‘look, we're actually publishing those salary ranges only where it's required by law.”
Hanan Wakeem: “Transparency is here to stay. 42 states have some sort of pay transparency law on the books now. So the rest are yet to follow, but it's going to happen. It is all about pay transparency and it's not a one-and-done exercise, either. It's so much more than that. It's about, okay, this is who we are in terms of compensation. This is our compensation philosophy, and we're being really transparent about it. We want to tell you what's going on, and we want to build that trust with our employees, that we are doing the right thing or working towards the right thing. And it's a continuous exercise because, per law, we are supposed to report it once a year. It has to be an ongoing, full-time review of where pay is against the market and for your employees.”
Emily Killham: “What's interesting is that just fewer than half of the HR decision makers said that they're publishing their pay gap reports for the year. A lot of the research that I was looking at said that 2022 might be the year of the pay gap report, the first time many organizations have really embarked on digging deep into pay gaps within their own organization. On the trust side, only about a third of employees agreed that if their organization saw pay gaps, they would do the right thing to address it. So there’s a way to go in terms of building trust.”
Hanan Wakeem: “I've had clients in the past that said, ‘don't tell me where my pay gaps are because it's discoverable. The fact is it's always discoverable if Jane or John brings up a lawsuit because there is a discrepancy in the way they are paid. All of it is discoverable. So sticking our heads in the sand won’t work. It's not going to be seen favorably as in, ‘oh, they didn't know it's okay.’ You should know what's going on. And again, let me refer back to those 42 states that now have a law in place saying you need to be a lot more transparent about your compensation.”
Pay Raises & the Link to Inflation
Emily Killham: “For the majority of the organizations we surveyed, there are plans to raise pay in response to inflation this year.”
Hanan Wakeem: “A lot of my clients are reacting to this inflationary environment by saying, ‘oh my goodness, my, all my employees are leaving, I'm having such a hard time attracting new workers, I’ve got to increase comp.’ And while yes, it's partly comp, I would very much caution against the blanket approach of comp increases because the immediate satisfaction of being given a 5% raise is really not going to have the same long-term impact as a targeted review of your compensation policies. Why Jane is going to get 5% while John may get 7% based on what's happening in the marketplace for those jobs. Not all jobs are treated the same. Some jobs have gone crazy, such as cybersecurity. The market has changed drastically in cybersecurity. Some other roles, maybe not so much. So doing that blanket 5% or 7% for everybody is not going to be satisfactory. You're not going to get the bang for the buck with a flat pay increase for everyone.”
Emily Killham: “In other words, treating everyone equally actually upsets everyone equally.”
Attracting Talent Through Culture
Emily Killham: “This was fascinating data to me because it says that what's attracting employees to your organization is not what's ultimately getting them to sign on your dotted line. When you look at this top blue line, these are really the things that employees said, ‘this is what made me look at the company to begin with.’ So it is the benefits and it's the comp. But that changes when you say, ‘well, why did you accept a job?’ So people who have recently accepted a job, what was the thing that made them make that leap and overwhelmingly, we learned it was a chance to have some kind of future career opportunity. So that gap between what makes me look and what makes me choose to move is really huge.”
Hanan Wakeem: “I'm sure many folks in the audience have heard this term, the whole ‘quiet quitting’ phenomenon that's going on right now. I work hard. I want to be noticed, and I want to be given the opportunity to grow. What happens to my career? I came in as an accountant. Am I going to be an accountant in 10 years? Or is there a career for me where I can move through, learn something new, become more valuable, become a bigger asset for my organization? Are you investing in me so I can grow and become much more valuable? So yes, the shiny dollars, it's like, ‘ooh, I want to go there.’ But why I really want to go there is because I feel this new organization will invest in me, whereas my current organization merely hired me. I was saying ‘yay’ for the first few months after my hire, but then they kind of left me on the corner and said, ‘just do your work.’ So now I'm disengaged. I ‘quiet quit.’ I'm just going to do what I need to do to have acceptable performance. Why I would leave and go somewhere else is because I feel like they're going to invest in me. And that's a great lesson for all organizations. How do I invest and really show that I care about you as an individual? Well, I'm investing in you so you can grow with the organization.”
The Importance of Compensation Philosophy
Hanan Wakeem: “Your compensation philosophy says a lot about who you are as an employer. It doesn't have to be complex and detailed – that's all internal facing – but out to my target audience, my employees, ‘who am I as a payer?’ If you go out there and say, ‘we are an on-target payer, we match the market,’ then awesome. That's really good, but that's table stakes, right? 85% of my clients focus at the market 50th, which means they’re on target with the market. But what more beyond that would attract someone to you? Well, what would make them stay is the full employee package. What if your benefits are better than average, where you don't make them pay a premium? You should advertise the heck out of that!? Because that's different from what others are doing.
“If you're investing in their career development, talk about that. If you are investing in them personally, so they can get out of debt by helping them pay off their tuition or helping with financial management courses, talk about that. If your organization focuses on a very important social cause that's near and dear to many folks' hearts, talk about that, or potentially the time off you give them to do their own volunteer work. Speak to what makes you special and unique. Maybe talk about how you’re a solid organization. You're loyal to your employees. You're not going to lay people off just because you had one bad sales quarter. Talk about what makes you special and why someone would be attracted to work here versus anywhere else.”
Perceptyx Helps Organizations Identify Employee Attraction & Retention Trends
Organizations concerned about the attraction and retention of talent have work ahead of them in compensation, organizational culture, and career development. A continuous listening program can help answer challenging questions about all three by drilling into survey data to discover what your employees need to do their best work, and how these needs are evolving over time.
To read our full report, click here to download it. To listen to this webinar in full, click here to access it. For more information on how your organization can utilize our technology and consulting expertise, schedule a meeting with a member of our team.