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18. November 2022
Why Your Team Needs to Rethink Compensation in 2023
This year has been a big one for conversations around the future of compensation. From companies such as Buffer making 100% of salaries publicly accessible to the recent EU ruling about pay transparency, it’s a lot for people teams to navigate.
To get an expert’s opinion on how to create a compensation offering that is going to set your organisation apart in the future, we spoke to Vaso Parisinou, Chief People Officer at Ravio, the real-time compensation benchmarking platform.
A Quick Glance at Current Compensation Trends
Did you know that 83% of employees value their wellbeing just as much as their salary? Having access to specific insights like this in your organisation gives you the ability to react to your employees’ needs and ultimately grow both retention and your overall culture.
To get some ideas flowing for which data to track at your organisation, here are some examples of what the team at Ravio have found from analysing their customers’ compensation data. Firstly, there may be a need for smaller companies to offer more comprehensive compensation packages:
Health-based compensation trends:
- Smaller companies are less likely to offer health insurance-related benefits (34% compared to 44% of bigger companies) and enhanced maternity packages (42% versus 56%). - Smaller companies are also significantly less likely to have a mental health offering (35% versus 56% of larger companies).
Trends for non-financial perks:
Non-monetary incentives used by their customers include:
- annual subsidised ski trips - remote working stipends - additional days off (such as birthday, menstrual leave and Christmas shopping) - learning and development budget - compressed hours - flexible benefits credit card - mental health support and therapy
When it comes to the most popular benefits offered, this is what emerged:
- 40% offer mental health or therapy-related benefits - 26% offer free food - 21% offer gym membership - 9% offer fitness benefits - 3% offer travel insurance - 2% offer fertility assistance
What’s the Best Way to Approach Compensation?
1. It’s Not Just About the Money
Vaso explains that as budgets are squeezed and tech companies move towards profitability rather than growth at all costs, companies will have to start thinking more broadly about compensation. Interestingly, within Ravio’s data, we can see that smaller companies are investing relatively heavily in offering comprehensive benefits packages in order to compete with larger businesses (80% of smaller companies offer additional benefits versus 88% of larger ones).
“Outside of salary, bonus and equity, we need to think about things like workplace flexibility in terms of working hours, working days and locations.” She adds: “We also need to think about creative ways to help people at different stages of their lives – for example, to what extent is it more effective for employers to directly contribute to childcare costs or heating bills?”
2. Transparency is Coming, Whether You Like it or Not
Regardless of your company’s approach to sharing compensation information, the world is moving into an era of salary transparency whether they like it or not, says Vaso. “Companies that accept this and own it through clear, transparent strategies will be the employers of choice.”
For Vaso, taking a look at how your organisation might tackle this is a very important priority for 2023: “Companies will need to start being a lot more transparent about their compensation strategy and demographic pay gaps and be ready to answer the hard questions with data and a well thought through action plan.”
3. Remember, You Are the Experts
To create a truly competitive compensation offering, you’ll need to start collecting the right data as soon as possible. “Make sure your HRIS is up to date and contains all the data inputs you’re interested in.” This is the very first step for any effective data-led people strategy. Vaso advises to think of this as if you’re building a home: “You need to build the foundations of your home before choosing a carpet. Your HRIS should be the scaffolding.”
Vaso also advises to overcommunicate to your stakeholders – your founding team, your executive team, your leadership team, managers and then employees. Salary benchmarking and transparency are still very new and are an emotional subject, so these stakeholder groups will have both strong and strongly held opinions. “Be ready for those, and hit them with the data. Remember, their views are important but the HR team are the experts.”
4. Fix Gender Pay Gaps at Time of Hiring (or Now)
Unfortunately, most companies will have a gender pay gap. The average gender pay gap in the UK is 8.3%. So, how can you help drive fairer pay? “Start early and be as aggressive as you can be about bridging the gap”, says Vaso. “It’s so much easier if you start off well rather than retro-fixing.” If you do spot a discrepancy outside of a pay review cycle, Vaso says “just go right ahead and correct it.”
The most important element of installing fairer compensation across your company is to craft the strategy that works for your organisation early and stick to it. If you can’t stick to it across a hypergrowth phase, then it’s not fit for purpose. Go back to the drawing board and rebuild.
5. Provide the Benefits Your Employees Really Want
It can be tough to know which benefits are considered standard or indeed competitive in the market. For this, you will need to dig into your compensation data, likely with a compensation platform like Ravio.
For the qualitative side, Vaso reminds: “Don’t hesitate to ask your employees outright.” Vaso says that she has often been surprised by the difference between what HR and leadership teams perceive to be ‘great’ benefits and what employees actually think of those very same benefits.
If your talent or DEI strategy involves targeting a certain group such as, say, parents, then go ahead and tailor your benefits package to that cohort too. Think about running an employee engagement survey to find out what is really a priority for your employees and try to tailor them accordingly.
Ultimately, 2023 will bring what some experts are calling ‘the Year of Total Rewards’. As inflation rises and salaries may not be so easy to increase, now is a time to think about the benefits that will make a real impact outside of work – those that improve health, enable employees to grow and create fairer organisations overall.
Want to ensure your people teams are prepared for economic uncertainty? Read our free Recession Ready guide.
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