As a key driver of
Now, if my years of experience in HR have taught me anything, it's that compensation strategies are constantly evolving to follow changes regarding
Leading compensation strategies involve offering above-market financial compensation to attract top talent. This approach allows organizations to select from a larger pool of highly qualified candidates, ensuring they get the best fit for their needs.
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Boasting a team of high performers sounds like a dream come true, but there's a potential downside to this approach. What many don't consider is the pressure this kind of environment can bring to employees. Having a team of extremely high achievers may lead to unrealistically high standards and expectations. As a result, workers face high levels of stress, fatigue and burnout. Thus, companies that opt for this approach should be mindful of their employees' well-being by setting realistic expectations within their teams.
On the other end of the spectrum, lagging involves offering below-market compensation. This approach is often used in markets with a large pool of available talent. It offers companies the flexibility to select and replace employees at a lower hiring cost.
Offering lower compensation doesn't necessarily mean employees will be dissatisfied, resulting in a high employee turnover. There are alternative ways to drive employee retention and satisfaction. For example, companies could offer a variety of flexible benefits, attractive perks or individualized employee packages. A paycheck invariably is just one aspect of why people choose to work there.
Lastly, aligning with market trends involves constant adaptation of compensation plans to remain competitive in the market. It is commonly seen in agile, fast-paced and emerging companies that are new to the market.
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While this is a great way to remain competitive, it may not be the best idea for larger organizations. That's because those corporate entities with more complex hierarchies may have slower decision-making processes, which can stand in the way of constantly keeping up with compensation changes in the market.
For companies that are in the position to regularly adapt their strategies, one thing is vital: they should ensure their compensation approach always remains agile or up-to-date with the latest trends and employee priorities.
An agile compensation approach first involves staying attuned to market trends. Key aspects of agility include embracing flexibility in benefits and rewards, implementing performance-based incentives, and incorporating skill-based pay, while ensuring transparency and fairness.
Moreover, organizations shouldn't forget to actively engage employees throughout the process. For example, they can offer employees the choice between a paid day off or monetary compensation.
An agile approach also could involve customized rewards. This means tailoring benefits to different departments or individuals, offering flexibility for those on second or third shifts, or providing different rewards for weekend work or on-call duties. For instance, working parents can have the option of customized work hours.
Companies that can and want to stay up-to-date with current trends do so by gathering market data on compensation and benefits.
This can be conducted through purchased reports on market trends, targeted market research, chats with candidates during interviews and meetings with existing employees.
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To shed more light on one of the points listed above, discussions with potential and current employees can provide extremely valuable insights. Asking employees what benefits matter most to them, as well as how their jobs could be made easier, more engaging or less stressful, could even help companies make innovative adjustments to their compensation systems.
At CAKE.com, we revise our benefits package at least once a year, often more frequently. For instance, we were aware that the pandemic was an extremely stressful time in our employees' lives, leading to newfound struggles and fear.
So, to help employees through this difficult time, we covered mental health expenses, held regular discussions on stress management and burnout prevention, and paid special attention to vulnerable groups. We also organized stress-relief events to help employees manage the demands of their work.
All in all, companies that seek to thrive must regularly check in with their workers and current market demands, offer customized benefits, and maintain an open dialogue with employees to ensure they're creating a balanced and effective compensation strategy.
By carefully selecting and continuously adapting compensation strategies, companies not only stay competitive but also foster a work environment that supports employee well-being and long-term satisfaction.
