The Great Resignation is over, the red-hot recruiting market has cooled a bit, and inflation is down. That\u2019s some of the good news for employers in 2024. But don\u2019t relax too much \u2013 compensation is still important. <\/p>\n\n\n\n
In a recent Compensation Best Practices Report published by Payscale, a majority of employers reported compensation as their biggest challenge \u2013 a bigger challenge than either recruitment or retention.\u00a0 And 53% of those employers reported that they would increase focus on development of a compensation strategy for 2024.<\/p>\n\n\n\n
To address these challenges, it is time, as an employer, to ask some questions.<\/p>\n\n\n\n
Is It Time to Develop Salary Ranges?<\/strong><\/p>\n\n\n\n Salary ranges, also called salary bands or pay ranges, establish the pay parameters for a job role or group of roles. Salary ranges are based on market information in conjunction with the organization\u2019s compensation strategy and philosophy. Pay ranges typically include a minimum, midpoint, and maximum amount.<\/p>\n\n\n\n If your organization is small, market pricing for individual positions can work well. But as a company grows, especially if it expands to multiple locations, finding market information for every job and location becomes difficult. <\/p>\n\n\n\n Salary ranges also provide the framework to promote consistency in offers to new hires and promotions and salary increases for existing employees. In the past, many organizations offered starting salaries to hew hires based on salary history, but it is now illegal in 22 states to ask about an applicant\u2019s salary history. And it\u2019s likely more states will adopt this type of regulation.<\/p>\n\n\n\n Salary ranges can also help to address issues such as salary compression (when salaries of new hires equal or exceed those of experienced employees in the same or similar role), pay equity (equal pay for equal work or work of comparable value) and pay transparency. More about the last one below.<\/p>\n\n\n\n How Will My Organization Address the Issue of Pay Transparency?<\/strong><\/p>\n\n\n\n Pay transparency is defined by World at Work as \u201cthe degree to which employers are open about what, why, how and how much employees are compensated.\u201d Pay transparency is often driven by legal requirements. Pay transparency laws vary by state, but generally focus on requirements that employers list salary ranges on job postings for open positions.<\/p>\n\n\n\n Compliance with legal requirements often means that current employees find out about pay ranges for their positions from job postings or external applicants. That can certainly cause <\/p>\n\n\n\n problems. The same Payscale Best Practices survey noted above reported that 14% of responding employers have lost employees because those employees saw posted job ranges. And legal penalties can be significant. In the state of Washington, which allows remedy through the court system (as opposed to enforcement by a government agency), one law firm filed over 30 class action suits in one week.<\/p>\n\n\n\n But pay transparency is more than compliance. It\u2019s about being proactive in your communications about compensation. That doesn\u2019t necessarily mean that everyone gets to see everyone else\u2019s salaries. That happens in some tech companies, but it\u2019s not common or required. What it does mean is that employees should understand how they are compensated and the rationale that determines their pay. That might include variables such as:<\/p>\n\n\n\n It\u2019s time to be proactive about pay transparency. Even if there aren\u2019t legal requirements in the locations where you do business, you need a compensation strategy that allows you to make offers to candidates and reward current employees within a fair, consistent framework. <\/p>\n\n\n\n What Do Managers and Supervisors Need to Know about Compensation?<\/strong><\/p>\n\n\n\n In my consulting practice, I\u2019ve often had managers and supervisors tell me that they don\u2019t have an understanding of their organization\u2019s compensation policies and practices. Sometimes the CEO is responsible for compensation decisions and doesn\u2019t effectively communicate the rationale to anyone. That puts managers and supervisors in the awkward position of not being able to answer employees\u2019 questions about their pay.<\/p>\n\n\n\n There are steps you can take to help your managers and supervisors. These include:<\/p>\n\n\n\n Managers and supervisors are ultimately responsible for the success of any organizational program or initiative. It\u2019s essential that they understand their role and responsibilities in order to guarantee that success.<\/p>\n\n\n\n Do Employees Understand Their Total Compensation?<\/strong><\/p>\n\n\n\n Total Compensation (also known as Total Rewards) includes not just base salary and other cash payments, but also the value of all employee benefits and perquisites that can be quantified. For many organizations, the cost of benefits, including healthcare premiums, retirement plan contributions, and paid time off can easily amount to 30% \u2013 35% of an employee\u2019s salary. That means the total compensation for an employee making $100,000 would be $130,000 \u2013 $135,000.<\/p>\n\n\n\n A 2023 survey conducted by beqom (a provider of total compensation management software) revealed that nearly half of surveyed employees don\u2019t understand their total compensation.<\/p>\n\n\n\n Organizations generally do a pretty good job of communicating total rewards when posting positions or interviewing candidates \u2013 after all, those are great marketing opportunities. But these same organizations often don\u2019t do a very good job of communicating total compensation to their current employees.<\/p>\n\n\n\n One way for an organization to improve total compensation communications is through a total rewards statement. A total rewards statement is an extremely effective tool to help employees understand the true value of working for the organization. Statements are personalized and typically produced and distributed once a year.<\/p>\n\n\n\n In the past, these types of statements have focused on quantifiable information. That includes financial information about base salary and bonus\/incentive payments, and benefits information including medical plan contributions, PTO, 401(k) contributions, etc. But there is now a current trend to include non-quantifiable information in these statements. That might include things like opportunities for remote or hybrid work, flexible and in-advance scheduling, and educational opportunities.<\/p>\n\n\n\n Growing your business means recruiting and retaining top talent. That means developing compensation plans that are both fair and competitive. It\u2019s a tough landscape to navigate, but answering these questions will help you get off to a good start.<\/p>\n\n\n\n By Susan Pal\u00e9, The Workplace Advisors, Vice President – Compensation<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" The Great Resignation is over, the red-hot recruiting market has cooled a bit, and inflation is down. That\u2019s some of the good news for employers in 2024. But don\u2019t relax too much \u2013 compensation is still important. 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