Corporate pay strategies have shifted due to remote work and inflation in recent years, leading to pay inequities and compensation inconsistencies at many companies, according to a new report.
The data from The Josh Bersin Co. reveals standard pay bands and performance-based pay models have fallen behind. Instead, corporate compensation should consider fairness, transparency, inflation and a systemic approach, the analysis recommended.
“The last three years have seen an increase in companies worrying about burnout, mental health and work-life balance for their employees. Today, with rising inflation and a slowing economy, a new issue has emerged: Pay is now the number one concern for workers around the world,” Kathi Enderes, global industry analyst and senior vice president of research for The Josh Bersin Co., said in a statement.
Pay and rewards are now the top drivers of employee experience, according to the report, with about 44% of employees believing they are underpaid. In-work benefits, which make up 32% of payroll, are no longer sufficient to meet employee demands for inflation-adjusted pay.
In addition, only 9% of companies effectively address pay equity issues, the report found. These companies have redesigned their pay-for-performance models to incorporate remote and hybrid work.
To better move forward, HR departments should use a new model of “systemic rewards” rather than “total rewards,” the report suggested. This approach better reflects evolving workforce requirements and balances pay equity and pay-for-performance with personalization options, it said. The “systemic rewards” model works due to focusing more benefits dollars on flexibility, career and recognition, the report found.
“A more systemic approach to pay and benefits is the best way to make your company ‘irresistible’ to current and prospective employees,” CEO Josh Bersin said in the statement.
“But, to be effective, requires collaboration with other HR domains (talent acquisition, learning and development, talent management, people analytics, employee experience, diversity, equity and inclusion) and with business leaders to solve business problems with the right rewards approaches, not just deploy rewards programs,” he added.
As part of this new approach, pay equity is becoming increasingly important to meet employee needs, the firm reported earlier this year. Companies are still struggling to meet the goal, even though clear communication about pay equity is key for employee retention. Employers have felt pressure for equity from several fronts, including shareholders, customers and employees; recent months have seen a substantial number of labor strikes, many of which included pay equity demands.
Pay transparency is also rising to the forefront of hiring conversations this year, as more companies highlight fair pay and pay transparency changes as part of the employee experience. Most of all, organizations should have a focused compensation strategy based on solid data and the latest best practices.