Compensation Strategies For Competitive Talent
Right now, overall attrition is high and competition for talent is even higher. That’s why companies are looking for new compensation strategies to attract much-needed talent - but also keep them engaged enough to dispel poaching.
Where we work, how we work, and people’s priorities have all changed dramatically over the past two years. Now companies are re-evaluating their compensation strategies to match. According to a recent survey, 76% of companies have altered their compensation strategy due to the pandemic’s effects. 75% of organizations also expect compensation will be more challenging in the future.
Here are trends shaking up compensation strategies:
BURNOUT & FLEXIBILITY AT THE STEERING WHEEL
While salary will always be a top concern, one of the key trends reshaping compensation is the need to balance flexibility with money. The drag on of the pandemic’s effects has brought us to the peak of a burnout crisis, which is deeply impacting how workers view total compensation and satisfaction with companies. Worklife balance solutions are starting to become non-negotiables for many.
REMOTE WORK CHANGING PERCEPTIONS
A second big factor impacting compensation conversations is the move to remote and hybrid work. Employees don’t want to be forced back into offices full-time and an Ipsos survey found that 40% of employees said they would even opt for less pay if it meant being able to work from home. Furthermore, companies who previously offered perks contingent on the office setting (such as free snacks, in-office events, or game rooms) are now looking to create value and culture in ways that are more inclusive of remote and hybrid employees.
CULTURE = READING THE BOOK BY IT’S COVER
Culture is inseparable from the first two trends, but worth pointing out alone. At Ari Agency, we are constantly talking to job candidates and culture continues to be a key reason instigating job moves. That’s because culture is behind the “if and how” of so many important things - such as daily interactions, how employees get recognized and rewarded, worklife balance, and whether employees can feel comfortable speaking up about ideas or issues. Nowadays candidates are investigating company culture more thoroughly during the hiring process because it provides a window into how companies and their employees make decisions.
How Companies Are Re-inventing Compensation
EQUITY FOR MORE THAN EXECS
Attrition has been rising since 2020 and equity, which was offered primarily for exec positions in the past, is becoming a key strategy to attract competitive talent and improve retention on a larger scale.
In fact, close to half of public companies and 35% of private companies said in a recent survey that they’re expanding equity offerings to a wider range of employees. 35% of public companies said they are also providing lookbacks for employees to buy shares at a lower price, alongside other stock discounts.
For example, this year Amazon announced that it will make stock grants to employees when they’re promoted. Apple also said that they’ll be providing high-performing engineers with out-of-cycle restricted stock unit (RSU) grants that vest over four years. These grants, which can range from $50,000 to $180,000, are also a retention incentive to stave off competitor poaching efforts.
Ultimately, equity is a way to keep employees invested and align their work with the ROI of the company - which is why so many organizations are looking to expand their use of it.
FLEXIBILITY THAT ISN’T FICKLE
Companies adopted flexible measures like remote work and flexible hours to survive the pandemic. Many companies such as Airbnb, Atlassian, Dropbox, Shopify, and Vista have now permanently embraced remote work, either fully or by allowing employees to choose their work style. Other companies are looking to make some level of in-office work mandatory and are in the process of getting people back in those seats.
The underlying common theme of being back in office has been frustration. There’s been a pattern of companies changing guidelines and delaying plans. Meanwhile, their workers are trying to plan their lives accordingly.
Employees have seen that they can be effective without the confinements of an office or the 9-to-5. And flexibility has positively impacted worklife balance. Unsurprisingly, 92% of employees surveyed said they’d like to work fully remote or with a hybrid model going forward.
What’s more - inflation is a new rising concern that’s complicating the already complicated redefining of work parameters. Now the thought of spending extra hours and money on commutes is being viewed as an even larger, unnecessary expense to enforce.
Bottom line - employees want remote/hybrid options and are looking for companies to make a reliable statement on their plans for the future. Companies who offer flexibility as part of their value proposition will have the upper hand when it comes to acquiring new talent, and the companies who don’t may be paying extra to secure that same talent. For more inspiration, check out this list of 45 big name brands and their official back-to-office (or lack-of-office) strategies.
WORK FROM ANYWHERE… BUT ACTUALLY ANYWHERE
Many companies who have embraced remote work still want work-from-home employees to be working within the same city, state, or country that their offices were originally in. Meanwhile, some companies are opening up these rules.
Stripe, the payment processing company based in San Francisco, now allows employees to work from anywhere. They also offered a $20,000 one-time bonus to re-locate away from the expensive city in return for a 10% cut to the base pay. And employees took it!
“We saw pretty major uptake. There were a lot of people where they took advantage of all the remote working that was going on last year to be able to move to be closer to their families, to somewhere they wanted to move previously”.
- John Collison, Co-Founder of Stripe
Stripe - alongside companies such as Automattic, Facebook, Google and Microsoft - continue to offer flexible working with location-based pay. Other companies are offering location flexibility with a different approach.
Zillow, for example, has adopted location-agnostic compensation. Zillow, which went through a hiring spree this past year, said that they are “de-emphasizing location as a component of compensation” and are tying compensation primarily to “an employee’s role, responsibilities and performance, with less emphasis on geography”. They further underscored that when you work for Zillow, “your long-term earning potential is determined by how you perform, and will not be limited by where you live”.
In similar fashion, Go Pro is anchoring pay to their head office location - regardless of where employees choose to live.
“We have decided that compensation for all U.S. based roles will be aligned with our California-based offices, with a similar regionally-based philosophy extended to our global offices. Full stop, we believe employees' compensations should be determined by their contributions to the organization”
- Go Pro Announcement
So when it comes to companies adopting any level of remote work, leaders will have to think about how wide their geographic allowances will be and if they want to leverage location-agnostic compensation to compete for talent.
NON-MONETARY PERKS - AND NOT JUST A SAD PIZZA PARTY
While small cash rewards throughout the year are appreciated, they can often get lost in the shuffle and get psychologically categorized as incremental income. Non-monetary incentives tend to be more impressionable because they easily stand out on their own. In fact, a study done on incentives revealed that:
65% of workers in a small-reward scenario will choose a non-cash award over the cash reward
85% of workers in a large-reward scenario will choose the non-cash award as well
The biggest challenge is ensuring that the non-cash perks and incentives you offer are inclusive of employees who work from home. Here are some examples of perks for a hybrid world:
Extra time off - awarded based on performance or part of a company-wide plan like half-day Fridays
Health & Financial wellness workshops - which can be conducted online or expensed in the city employees are in
Professional development courses - which also can be done online or locally
Experiential Perks - such as online escape rooms, paid trips to the spa or online cooking classes
Food - sending a specialty snack box or meal always gives people something to talk about with both co-workers and friends!
What non-monetary perks will work for you really depends on your employees preferences and personal interests, so make sure to seek their feedback before investing. Similar to when you give a gift to a friend, these non-monetary perks showcase that you’ve put extra thought into how you could brighten someone’s day.
Our Take
Unprecedented times, new normal, changing like never before - we’re all tired of hearing it but we have to acknowledge the lasting impacts the pandemic has had on how people work and what they want in their lives.
Everyday we talk with candidates who have already overturned their priorities - who are asking specific questions about a company’s work flexibility, culture, and how a company engages remote workers. The answers to some of these questions can be non-negotiables for them.
At the same time, we’re talking with companies who are trying to figure out how to compete for talent without always paying the extra buck. That’s where compensation strategy and its diversification comes in.
The turbulence of back-to-office plans is definitely a hot topic in these conversations. Candidates are looking for some type of flexibility - and a culture that embraces flexibility instead of scowls at it. Equity is also becoming a more interesting option for companies, not just as a cash alternative but as a retention strategy.
If your compensation strategy is strictly structured around a salary, then that’ll be the main lever you have to compete with and chances are you will pay that extra buck each time to secure competitive talent. But by diversifying, you have the potential to increase the perceived value of your offer without breaking the bank.
At Ari Agency & Ari Executive, we work with digital leaders and disruptors who rely on us to find and attract some of the most competitive talent in the digital space. If you’re interested in the trends impacting workforces or looking to hiring game-changing talent, contact us today to learn more about how we can help.
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