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12 Case Studies of Companies that Revised How They Compensate Employees

S HRM has partnered with ChiefExecutive.net to bring you relevant articles on key HR topics and strategies.

Higher compensation is part of the ransom for dealing with the pandemic for most American companies and industries. So salaries, wages, benefits and perks will cost them more—perhaps a lot more—in the year ahead.

The way CEOs and CHROs can make sure the Great Raise works to their companies' advantage is to be proactive, creative and equitable about it. Yet they also must weigh strategically the demands of the moment with their long-term compensation strategy.

"This is a time for real balance when it comes to how you deal with retention and attraction," said Paul Knopp, chair and CEO of KPMG US. "We all have to make sure we meet the market when it comes to base compensation, but the market has changed in a way that you also have to look at those benefits that are most attractive to employees for their careers."

While median full-time earnings of $1,001 per week in the third quarter of 2021 were nearly 9% higher than two years earlier, according to the Labor Department, expectations for 2022 remain frothy given the tight market for talent, the free-agent ethos encouraged by remote work, the geographic reshuffling of workers and decades-high inflation. U.S. wages will increase by 3.9 percent in 2022, according to the Conference Board, the highest rate since 2008.

The compensation surge is occurring at the high end, at a low end that's getting higher and everywhere in between. Goldman Sachs, for example, is offering paid leave for pregnancy loss and expanding the amount of time employees can take for bereavement leave while also boosting its retirement-fund matching contributions for U.S. employees to 6% of total compensation, or 8% for those making $125,000 a year or less.

Meanwhile, at Tyson Foods' chicken-processing plant in New Holland, Pa., the company has started offering a three-day workweek, plus pay for a fourth day that retains employees' status as full-time workers. Just for good measure, Tyson has created a $3,000 sign-on bonus for new hires.

"We're in a bidding war for talent that will go on for a long time," said Alan Beaulieu, president of ITR Economics.

For CEOs and CHROs, several new factors demand their attention along with the overall spike in compensation. They include:

• The end of retention. The "idea of a long-term commitment to one employer has been dead for a while, but it's really dead now," said Dave Roberson, CEO of the RoseRyan financial consulting firm. "You must have a stream of people. Assume you're going to be replacing people. So how do you keep the people you have, if you can, but also bring the next group in?"
• High-balling. A deal to recruit someone may not really be a deal these days. "You've made an offer and you think you've got a hire, and then they're asking for $5,000 or $10,000 more," said David Lewis, CEO of OperationsInc, an HR consulting firm. "Now you have to ask yourself what makes more sense strategically: say no and hold the line and lose the candidate and restart the process, not knowing how that will work out? Blow up your compensation structure? Or as a Band-Aid, give that person a sign-on bonus in hopes that the package will get them in the door?"
• Need for equalization. Recruiting with higher compensation also requires boosting pay and benefits for retention. "You need to be mindful of what you're paying others in the organization and understand the detrimental impact it will have when you bring someone in alongside a tenured employee," Lewis said. "Operate on the idea that everyone's salary is basically posted on the pantry door in your office."
• A focus on mental health. The pandemic, anti-contagion measures and the takeover of remote work has left many Americans isolated, confused, lonely—or at least disjointed. And they expect their employers to help them cope and adjust.

"Mental health is a real thing, regardless of how [a previous generation of leaders] feel and what we did," said Jeffrey Immelt, former CEO of General Electric. "Particularly post-Covid, it's something worth your time to try to understand."

Many Fortune 500 companies already offered mental-health benefits, but by now "mental health is just a place setter: You've got to have it in place to be competitive in the market today, across the board," said Richard Chaifetz, founder and CEO of ComPsych, a large provider of employee-assistance programs. "Companies understand the importance of keeping their people functioning at the highest level."

Codility, for example, has begun supplying all employees with 27 days of paid time off per year plus four mental-health days, which don't have to be approved. "We're offering these days in addition to personal-time-off days to recognize and bring to light the importance of mental health," said Natalia Panowicz, CEO of the platform that evaluates the skills of software engineers, with its U.S. hub in San Francisco.

CHRO360.com asked a dozen CEOs, CHROs and other top executives about their compensation strategies and practices for 2022. Here are some of their ideas:

Let Them Name Their Salary

Chris kovalik, ceo, rushdown revolt, a video-game maker in new york city.

We started as 12 part-timers, mostly people who were giving me their moonlight hours. That's not a lot different from now, except now we have 75 people. The magic of what we do is that we don't recruit anybody. We're just a magnet. We let people come to us.

When it comes to compensation, some say they wanted to volunteer, that they weren't expecting compensation. But we never, ever allow people to volunteer their time for us. So we say our company minimum wage is $15 an hour, and if you insist, we can pay you that per hour.

But generally people come to us with an expectation of compensation because they see that we're making money. When compensation came up, we'd say, "I don't know what your skill set is. I've never hired you before. How much do you think you're worth, and how much do you need?"

If every hour we're compensating them for the amount of money they want and need, if someone is part-time and only giving me 10 hours a week, I'd argue that they're giving me their best 10 hours. Because they're getting paid what they want and doing things that they want to be attached to and be part of.

There's no pattern to the compensation requests. If their number is too low, we'll say, "Are you sure? Are you just giving me a low-ball number I'll say yes to?" If it's high, I don't talk them down, but I ask them to justify it, and if the justification isn't adequate, what I say is, "How long do you think you'll need to prove that justification? Two to three weeks? Then let's pay you two-third to three-quarters of what you asked, and if you prove it, we'll go up to whatever you said."

Tailor Package for Youth Appeal

Ronald hall jr., ceo, bridgewater interiors, an auto-seat maker in detroit.

We enjoyed very low turnover pre-Covid, but during the last two years we have had to replace probably one-third of our workforce at our largest facility, about the same number from termination as voluntary. So we've had to work harder than ever to recruit.

Our most-tenured employees, who are the most highly trained, have had to pick up the slack, working record amounts of overtime and less-predictable production schedules.

In our upcoming negotiations with the United Auto Workers, we're trying to emphasize short-term bonuses rather than wage increases that get baked into our costs. But we have continued health insurance through the pandemic as well as our tuition-reimbursement program, and many employees have thanked me for that.

What I am hearing from new employees is that they're not as interested in benefits but rather in higher cash wages. We've long touted benefits like our generous 401(k) matching and better medical coverage versus our peers, but we're finding that doesn't resonate as readily now as it did a decade ago. So I've asked my team: Should we be looking at some kind of hybrid model of offering higher wages to people who want those and move those dollars from the benefits side to the wages side?

We've also looked at providing childcare in a partnering arrangement where there could be a center developed near our facilities, and we would arrange for some sort of company subsidy or guarantee some level of attendance. The challenge with that is the auto industry runs around the clock, and you'd need a daycare provider who'd be committed to opening around the clock and provide legal, regulated, benchmark-standard levels of care to all those children in the off hours.

Equalize as You Acquire

Diane dooley, chro, world insurance, a business and personal insurer in tinton falls, n.j..

We onboarded about 800 employees in 2021 through acquisitions of small agencies and organic growth, but there had been no compensation modeling. Now we're building out our compensation philosophy with commission plans, incentives and bonuses, centralizing components and ensuring we have the right framework.

When we do an acquisition, we might retain their compensation model for a year or two years then slowly migrate, but make sure employees aren't taking a cut in pay. We are also capitalizing commissions into base compensation—identifying what commissions would have been and what they will be, and recognizing roles that are moving away from a commission base.

Some agencies we acquire are smaller and may be below-market for total compensation. Now we're addressing those concerns. They need to be more front and center. We must do everything to retain our employee population. If they're woefully underpaid, or not at market, we risk losing people, and we don't want to do that.

Educating the owners of some of the agencies [we acquire] is a piece of this. As we partner with them, we are evaluating them and asking, "Did you give people an increase this year?" We're not telling them what to do but providing guidance about what to do.

We're also modifying and increasing our benefits, such as giving employees pet insurance. And making counteroffers is a critical piece today, usually for high-end employees. They work better than they used to because not a lot of people really want to make a move in this environment.

Innovate for the New World

Jason medley, chief people officer, codility, a provider of skill-evaluation software in london.

We really have to step back and be innovative and force ourselves to change. The companies that are going to win are going to be more progressive early and not fighting what's happening.

One thing we've done is change our outdated compensation models that give higher pay to employees living in tech hubs like San Francisco and New York and lower compensation for areas inside the coasts. Now, we've created a United States-wide salary band, so no matter where you live, the compensation is based on the role, not the location. You can go live and work wherever you want to.

We decided to approach compensation through a very human lens. People have seasonality in life, and maybe they are caregivers at different moments and want to live in different places. We want to be as flexible as possible, and this country band gives us that flexibility.

We are starting to see the same thing in Europe, where we have our headquarters in London and offices in Berlin and Warsaw, and employees all over, especially in Poland. People are wanting to live in the countryside of Spain but demanding a London salary. So we are transitioning to one European Union band and saying, "Here is your rate—live where you want to."

We are also seeing that with global warming, it's harder to get work done for people on the west coast of the U.S. and in Europe, because they didn't build homes with air conditioning. If you're sitting in a house at 90 degrees with no air conditioning, there's no way your performance is the same as someone with AC. Supplementing air conditioning isn't something we thought about before, but now we're very much having to look at those things.

Stay Ahead of Expectations

Traci tapani, ceo, wyoming machine, a sheet-metal fabricator in stacy, minn..

Our wages have gone up by about 20% for the typical worker. When I found people I could hire, I knew they were being brought in at an hourly rate that was too high for what I was paying my incumbent workers.

My strategy has been to be proactive about that and not wait for [existing] employees to say something about it or give them a reason to look for another job. We're proactively making wage adjustments to make sure our incumbent workers are in line.

Employees will leave for more money, so they're very appreciative of it. But in my shop, I also know that people like working here, and I know they don't want to leave. I don't want to give them a reason. If they can get an increase in pay that's substantial, I know that I can cut them off at the pass. Retaining my workforce is my No. 1 strategy. They're already here, and I'm going to do everything I can to keep them.

For that reason, we've also been more generous as time has gone on with paid time off, offering it sooner than we once would have, especially for new workers. We recognize that it's healthy for people to be away from work and also, in the pandemic, people need to be away from work. Knowing they have some paid time off makes it easier for them.

Leverage Benefits for DE&I

Mark newman, ceo, chemours, a chemical manufacturer in wilmington, del..

In general our company hasn't seen the Great Resignation. And in fact, we continue to believe our focus on being a great place to work is serving us well, along with appropriate benchmarking on compensation issues.

Chemours  is  a great place to work. We survey our employees every year, to improve our working environment from a compensation and benefits perspective. Also, from the [diversity, equity and inclusion] perspective, we're trying to make sure we tap into the full breadth of talent in our industry.

That means, for instance, we are helping people more with college loans. We are offering same-sex [marriage] benefits. We are providing more family leave for people who have kids. There is clearly an aspect of our benefits package that is evolving to be consistent with our strategy of making Chemours a great place to work.

Overall, we view compensation as something where we want to be either in the median or upper quartile. It's something we're very focused on from both a wage as well as benefit level. From Covid, there's been no fundamental change as it relates to us wanting to be in the median to top quartile.

We've had to make some local adjustments where the labor market is more super-charged. For example, we see a lot of that in the Gulf Coast region, especially with oil prices coming back, and petrochemicals and refining. But it's very much a regional factor. So if industries are moving to a certain region, like the South, you have to make sure you stay current with local benchmarks.

Offer Skin in the Game

Cesar herrera, ceo, yuvo health, a healthcare administrator in new york city.

We're a year-old company that provides tech-enabled administrative solutions for community health centers across the U.S. that are specifically focused on providing primary-care services for low-income individuals. We have a team of about 10 people right now, and we have a number of open roles and positions where we're likely going to be tripling the size of our team in 2022.

Google can compensate well above the market rate. We don't have that since we're an early-stage organization. What we do have as levers aren't up-front financial compensation but equity, support in your role and a relatively flat organization where you can have significant autonomy.

A lot of individuals are going to be driven by the mission; that's the case with the entire founding team. We've made sacrifices to create this organization. So you can come in at a meaningful position with a lot of decision-making.

But one of the biggest carrots we can give is, if you accept the lower pay and the risk that comes with an early-stage organization, you can have meaningful equity in the company. We have an options pool which is not to exceed 10% ownership of the organization, and as we grow and scale, we increase that options pool. For senior-level leaders, we do expect to be able to distribute up to 10% of the company to them.

Pay Extra for Continuity

Corey stowell, vice president of human resources, webasto americas, a maker of automotive sunroofs in auburn hills, mich..

We had to recruit for several hundred new openings at a brand-new facility right at the beginning of the pandemic. So we instituted an attendance bonus. For those who worked all their hours in a week, we paid an additional $3 an hour. We really had to keep it short-term, so we paid it weekly. If you wanted to pay it every month, you couldn't do it, because people needed that instant gratification.

Otherwise they could get it on unemployment. With our pay rate, they could earn more to stay at home and collect unemployment, a significant amount more than they could earn than working for us. So we also had to increase our wages, and we increased them by more than 20% in some classifications [in the summer of 2020].

We've filled all of our positions, but it's still a challenging market. We've had to increase all our wages, with the lowest for a position being $17 an hour, on up to $30 an hour.

We also have offered stay bonuses of $500 a month for three consecutive months, up to $1,500. And for hourly employees we've instituted a different attendance policy, where they can earn two hours of paid personal time for so many hours that they work consecutively with no attendance issues.

The key is the schedule—we can prepare and get someone to cover. That's easier to do than just managing whoever's going to come in today. In this environment, that really has changed with our workforce, and it's tough to rely on our current workforce.

Give Them the Keys

Elliott rodgers, chief people officer, project44, a freight-tracking software provider in chicago.

We have equipped and subsidized a van that we call Romeo, which employees can use to combine work with personal uses like family road trips. We cover the cost of the rental. It's a luxury van that comes equipped with a bed, a toilet and shower, Wi-Fi, device charging and a desktop workspace. And it's pet friendly.

We started it as a pilot project and reservations were full within 10 minutes of when we posted it internally. Then we extended it into 2022. By the end of 2021, more than 20 unique team members completed or nearly completed reservations. They've ventured out to places spanning Mount Rushmore and the Badlands; Rocky Mountain National Park; Salem, Mass.; and Pennsylvania. A pretty broad number of places.

It's something we're really proud of. It allows our team members the opportunity to work in a lot of different places while still being connected to us. And they've appreciated the opportunities to stay connected, but also be connected in other ways with nature and other places in the world. They can maintain their perspective while also continuing to contribute to their role in a productive way.

When you place a team member at the center of what they'd want in an experience like that, the value of it answers itself. It creates a comfort level where it provides the necessities for you to be able to continue to work, and you can work from anywhere. It's the best of both worlds. It's one thing to find that on your own but another to have that accessible to you via work, but done in a way that caters to you.

Help Them Come, Go—and Stay

Aamir paul, country president - u.s., schneider electric, a maker of electrical distribution and control products in andover, mass..

With our knowledge workforce, it's been about intentional flexibility. So, for instance, we launched a "returnship" program for women who'd left the workforce but might want to come back even at reduced hours. That means 20, 30, up to 40 hours a week, and we're finding some incredibly talented people who haven't been in the workforce.

This program is available to men as well. If there's a field engineer who's been in the electrical industry for 35 years and he's now retiring, but he's five years from getting his medical benefits, we say: Don't retire. Go on the program. Work 20 hours a week. Work from home. We'll reduce your pay proportionally, but we will couple you with three university hires, and they will call you on Microsoft Teams and show you what's happening on the job site, and you're going to walk them through it. Work just three days a week. We'll cover your benefits.

We've also expanded the parental leave policy, which already was one of the best in the industrial sector. And we created a way for people to buy more time off without having to leave their positions. They apply for more unpaid time off and we allow them to retain their position and seniority and allow them to work through whatever life event it is.

We landed on six weeks for the maximum. In the most intense industries—such as a fighter pilot or a surgeon—they've found that six weeks of being out of the rotation allows them to re-set. So that's what we did. Before, the limit was two weeks.

Give Sway to Local Management

Tom salmon, ceo, berry global, a maker of plastic packaging in evansville, ind..

We've got to be competitive in all the geographies we serve. We have 295 sites around the world and manage our employees in those sites geographically. Every geography will be a different labor environment. There are different criteria that employees are looking for. It's not just about wages but taking everything into consideration.

We let local management handle things with their insight about wages and competition. They're hearing directly from employees about what they like and don't like, what they want more of and less of. It's a site-by-site discussion.

For example, at some sites, it may be important for employees to be able to access the internet at lunch; at other sites, they may not value that as much. Some want a more advanced locker facility, with different shower facilities. That includes the southwestern United States, where the temperatures are warmer; but in New England, some might not want that.

In any event, if you treat these things locally, you're going to be able to affect that local population and address the need of that geography. If you blanket something across our entire plant population, you may provide something that's not desired or needed.

We depend on our local management to respond to the different demands in terms of compensation and benefits at their sites. The better the front-line leadership is, and the more satisfied their team is, the higher our retention rate and productivity and safety performance. So these leaders participate in profit-sharing plans for those respective sites, because they have a great influence on the success of a given facility.

Focus Benefits on Flexibility

Paul knopp, chair and ceo, kpmg us, a financial consulting firm in new york.

We announced a new package of enhancements to our benefits and compensation, tied to mental, physical, social and financial well-being. These increases are the biggest in the history of the company. You have to make sure your base compensation meets the market, but you also must have attractive benefits.

For example, we cut healthcare premiums by 10% for 2022 with no change in benefit levels, and we introduced healthcare advocacy services. We are replacing our current 401(k) match and pension programs with a single, automatic company-funded contribution within the plan that's equal to 6% to 8% of eligible pay.

As part of this, we're focusing on the crucial element of ensuring that employees know you're watching out for them. They also are looking for flexibility—you don't want to under-index on how important that is. So we also are providing up to three weeks additional caregiver leave, separate and apart from PTO. And all parents will receive 12 weeks of paid parental leave, in addition to disability leave for employees who give birth, allowing some up to 22 weeks of paid leave. We also have expanded our holiday calendar to now include Juneteenth.

Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other business publications. He lives in Michigan.

This article is adapted from www.ChiefExecutive.net with permission from Chief Executive. C 2022. All rights reserved.

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HRSOFT CASE STUDIES

Streamlining complex compensation plans is our specialty.

Manage your enterprise’s compensation lifecycle and accurately recognize top performers with a digitized, integrated system. Keep employees invested and your HR team in control while preventing compensation chaos.

Turning Complex Challenges Into Superior Results

Time and time again, HRSoft has helped companies untangle chaotic compensation cycles. Here’s how.

Product:  LTI Management Software

Industry:  Manufacturing, Energy & Utilities

• Manual processing and tracking of highly valuable LTIP program for senior executives and key talent left the organization at risk and struggling to communicate the full value of awards.
• Time-consuming manual process of calculating annual incentives across seven independent businesses introduced a risk for errors and costly mistakes.
• Inability to drive change management across the family of business with manually independent compensation processes.

KEY RESULTS

• HRSoft’s LTIP Management and Bonus Management modules were configured to manage all seven business units within one platform with proper access rights for leaders and administrative staff.
• HRSoft’s seasoned compensation consultants learned the highly customized LTIP program and enabled its setup of unique rules and vesting schedules within the flexible framework of HRSoft’s platform.
• HRSoft’s employee portal gave employees year-round access to LTIP portfolio as well as What-If scenario modeling tool.
• Standardized incentive bonus calculation across all business units and reduced processing time for admin team.
• Improved employee engagement, understanding of LTIP program and the true value it provides to all eligible employees.
• Flexibility to evolve, adjust and update incentive and LTIP programs in the future.
• Consolidated reporting available in seconds as opposed to days or weeks.

Client since: 2021

Product: Compensation Management Software

Industry:  Insurance Software

• Needed a compensation management solution to replace spreadsheets.
• Wanted to save time on developing, reviewing, modifying and distributing data.
• Launched HRSoft’s compensation management software to provide data integrity and vastly reduce opportunities for errors.
• Generated a 2x ROI during the first bonus cycle for the hours and energy saved.
• Provided field teams with increased transparency and accessibility by making it possible to perform real-time changes and updates in the system.

Client since: 2020

Product: Compensation Lifecycle Management Software

Industry: Healthcare

• Needed a compensation lifecycle management solution to integrate with WorkDay for performance and merit planning.
• Launched HRSoft’s compensation lifecycle management solution to make a one-stop shop for managers to plan their annual increases for their teammates.
• Empowered managers to view their entire teammate roster to assess performance and see who is eligible for a merit increase or inline promotion.

Industry: Pharmaceuticals

• Needed a new compensation lifecycle management solution to replace their sunsetted tool.
• Wanted a more flexible tool for customization and providing the right message to employees.
• Launched HRSoft’s compensation lifecycle management solution to provide more customization options and a tailored employee message.
• Automated reporting so top-level leaders can see an overview of the planning and budget.

Product: Pay for Performance Solution

Industry: Medical Technology

• Needed a long-term performance management solution that could integrate with ADP Workforce Now Payroll® to enhance its merit performance management process.
• Wanted to automate the process of sharing data between the payroll and performance management systems to save time and money.
• Required a solution that could support multiple languages.
• Looked to recognize employees who brought value to making their mission of improving the quality of life for people living with diabetes.
• Launched HRSoft’s pay for performance software with ADP Workforce Now Payroll® integration in 2021, which handled the complexities of pay for performance integrated with the HCM and payroll.
• Automatically shared employee data between HRSoft and ADP systems, saving time and hard dollars.
• Provided a performance management solution that supported the languages of LifeScan’s global employees.
• Empowered LifeScan managers to do what they need to get done, from annual performance reviews to other interactions. LifeScan received positive feedback from both manager-level users and employees.

Industry: Critical Event Management Solutions

• Needed a scalable compensation management solution that could integrate with UKG Pro™ to replace massive excel workbooks and manual entry.
• Required a solution for providing currency conversion, configurable structure and hierarchy for a matrixed organization, real-time collaboration and versioning.
• Desired to improve employee records, version control, access management and collaboration.

Client since: 2017

Industry: Financial Services

• Desire to pay employees based upon a full view of short and long-term total comp including salary, bonus and equity awards
• Needed process that could provide a proper view of pay that allowed for budget, decision support and manager flexibility
• Launched HRSoft’s compensation management software  in 2017, with terrific feedback from managers who can strategically reward individual employees with comp elements that make the most sense for each employee.
• Aiding in key employee retention by giving managers the flexibility to identify most motivating elements for each employee.

Industry: Insurance

• Managed compensation recommendations manually for 1,500 employees, which involved time-consuming procedures and inherent risks.
• Internal solutions exposed the company to security vulnerabilities that challenged the IT department to manage effectively.
• The two-person compensation team often experienced a “shutdown” period for all other projects and daily work during the compensation process, creating backlogs, stress and extended working hours.
• Launched HRSoft’s compensation management software that met PMA’s standards and requirements for reliability and customer satisfaction.
• Competitive pricing within PMA’s budget provided good value for money.
• Maintained business timelines and met operational goals through timely services and on-schedule delivery.
• Managers could access and review team compensation recommendations securely and efficiently.
• HRSoft’s team was responsive and offered insightful guidance. Scheduled meetings and accountability kept the project on track, with working sessions helping to complete checklist items efficiently.
• Increased productivity and efficiency through the automation of repetitive tasks and streamlined workflows.
• HRSoft’s advanced data management and analytics improved budget management and strategic decision-making.
• The user-friendly interface and enhanced functionality led to higher user satisfaction and smoother interactions with the software.
• Managers praised the ease of use and access to approved merit compensation data and notes.
• The compensation team could focus on other initiatives, eliminating backlog and the need for a “shutdown” period.

See What Our Clients Have To Say

There’s no better way to learn about our clients’ experiences with our compensation lifecycle solutions than from their own words. That’s why we invite you to explore our client testimonials.

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• SouthEast Asia
• Leaders Speak
• Brand Solutions
• Payroll and Benefits
• Case Study: How a compensation model ensured zero attrition in this company

• Hemanshi Tewari ,
• Updated On Jul 26, 2022 at 08:47 AM IST
• The entire compensation system for blue-collar employees is driven by co-created baskets that reflect the standards of living.
• The cost of the basket is then reviewed against an ‘affordability value’, which is a pre-defined share of the company’s revenue.
• Elgi has almost zero attrition among its blue-collar employees.
• While unions have become a vogue, especially in manufacturing firms, Elgi Equipments has zero unions.
• Since the launch of the compensation plan, not a single work hour was lost due to unrest.

How Amazon Pay’s culture is unique within the Amazon ecosystem

An insight into Aarti Industries’ hire-to-retire strategy

Why Japanese workplace culture promises a better retention rate

Why did PayU launch its new EVP amid a fierce talent war?

• By Hemanshi Tewari ,
• Published On Jul 26, 2022 at 08:47 AM IST

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Compensation Management: How To Solve Key Compensation Challenges

Discover how you can use data to support the people moments that matter, solving compensation challenges for your employees and your organization.

Popular topics

Compensation management has long been a major component for any company’s HR strategy. As the authors of Aligning Compensation Systems With Organization Culture put it: “Depending on how [compensation is] designed, communicated, and managed, it can positively or negatively influence an organization’s culture and impact an organization’s optimal performance.” 

This is particularly true during times of economic upheaval, when organizations need to balance expenses with retaining their top performing employees. Data-driven compensation management—powered by workforce analytics —helps organizations effectively optimize salary and rewards so that they are commensurate with employee contributions, while also ensuring financial sustainability for the company. 

This article will explore the concept of compensation management and its benefits, and discuss how organizations can use analytics and platforms to solve key compensation challenges.

What is compensation management?

Compensation management is a collection of programs, policies, and strategies that companies use to determine total compensation—including salary, benefits, and perks—for their employees. 

The HR department is typically in charge of creating and managing the compensation strategy for the organization. Their responsibilities range from ensuring that compensation is competitive in the market, to establishing salary and total compensation ranges, to negotiating salaries and raises. 

A successful, complete compensation program uses both financial and non-financial incentives to reward employees. Because of that, compensation management is a key component of employee retention , satisfaction, and performance management. 

Specifically, compensation management includes:

Developing and implementing programs and policies for employee compensation

Planning and distributing the overall pay and benefits package to employees

Ensuring total compensation remains competitive within the industry, and equitable across the organization

Managing the company benefits program

Ensuring that job classifications, and their associated compensation bands, are up-to-date

The primary objective of compensation management is to make the right decisions about pay and rewards to attract and retain the talent that’s needed to achieve company objectives. It’s also closely tied to the overall strategic goals and budgets for the organization as a whole. 

Because of that, it’s important for organizations to base their compensation decision on relevant and accurate data that rolls up to larger company initiatives. Analytics, therefore, plays a big role in compensation management.  

Why is compensation management important?

Compensation management is important because it dictates the strategy behind one of the most important factors for most employees when choosing to join or stay at a company. Salaries are also usually a company’s biggest cost center, meaning proper management and forecasting is critical to remaining financially viable. 

The benefits of compensation management , therefore, apply to both employees and the company as a whole. 

They include:

Attracting and retaining top caliber candidates by offering fair compensation in the market

Controlling costs and forecasting expenses , which is particularly important during economic downturns or periods of change

Creating greater transparency into compensation , something that 60% of employees say would prompt them to change jobs 

Ensuring consistent and merit-based compensation that recognizes and rewards top performers for their contributions

Increasing employee satisfaction and retention rate, by addressing and acting on a major priority for virtually all employees

Ultimately driving better employee performance thanks to employees being happier, loyal, and less distracted about pay equality and transparency 

While the benefits of compensation management are clear, achieving them isn’t always quite as black and white. This is where a solid compensation strategy comes into play, along with the right solutions to make managing that strategy easier. 

Let’s talk about the second priority: choosing the right compensation management solution.

What to look for in a compensation management solution

Compensation management software helps HR departments create, manage, and monitor the impact of their compensation programs. They marry employee and organizational data to help create and execute an optimal compensation strategy. 

The primary purpose of using a compensation management solution is to: 

Optimize compensation costs, while remaining competitive 

Develop effective compensation strategies for candidate recruitment

Automate compensation management, pay adjustments, and package creation

Analyze and visualize compensation data to help HR make the right decisions 

When evaluating compensation management solutions, HR departments should look for an option that makes it easy for them to understand what competitive and fair pay looks like for their workforce. Every business is unique, and it’s important to choose a compensation management software that can connect to a people analytics solution. This will ensure that the HR team can get insights on how to improve and optimize their compensation program to meet the needs of their people.

Here are some fundamental capabilities to look for when assessing compensation management solutions: 

Automation. A compensation platform should help to streamline and simplify compensation practices. That means automating workflows, making it easier to identify and analyze key data, and creating compensation frameworks.

Calculations. Calculations are critical to any compensation plan. This is how organizations both establish suitable pay frameworks, and ramp that information up to the wider company budget. As companies grow, it can be tricky to standardize and track compensation across all employees. Compensation management software can perform those complex calculations, saving HR teams time, errors, and the risk of inequity. 

Budget planning. As mentioned, compensation is a significant factor in any organization’s overall budget planning. Because of that, ensuring accurate compensation figures and clear lines of communication is key. Compensation management software can help teams quickly and reliably access and share budget and compensation data to ensure alignment. 

Data segmentation and reporting. As companies grow, they generate more and more compensation, people, and financial data. Without the right software, this data can become unmanageable, raising risks of improper or inconsistent compensation, or pay allocation based on unclear reasoning. Choosing a platform with strong data segmentation and reporting capabilities will help HR teams quickly find and act on trends, identify and mediate problem areas, and generally improve their decision making around compensation. 

Compliance. Again, as companies grow, compensation becomes more complex. That’s especially true for organizations that operate internationally, opening them to complexities around regulatory and regional compliance in their areas of operation. Compensation software can help navigate those tricky compliance waters, ensuring that the company remains compliant with all rules and regulations for all regions.  

Integrations. Compensation data cannot be siloed. It must be accessible by HR, business operations, and senior management to ensure they can make informed and timely decisions. Because of that, finding a compensation management solution that integrates with the rest of an organization's tech stack is critical. This will help ensure that compensation data is accessible and actionable across all departments that need it. 

A core theme throughout this article so far has been the importance of analytics and data. Let’s dig a bit deeper into how to use that data as a core part of compensation management. 

How to use compensation analytics

Compensation analytics is a sub-discipline of HR analytics that focuses on optimizing the cost of a company’s workforce compensation to find efficiencies and drive bottomline growth.  

There is no shortage of people data—from HRMS to Applicant Tracking to Payroll to Learning Management systems—the scope of data being generated each day can be overwhelming. But it’s also critical to organizational success long term. 

Whether it’s managing job candidate salary expectations, addressing employee pay concerns, developing workforce plans, recruiting strategies, ensuring compliance, or helping managers understand opportunities to differentiate top talent, data allows organizations to make decisions based on facts, not guesswork or assumptions.

To be successful in leveraging that data for insights, it’s critical that HR and business leaders have a way to mine for insights quickly and correctly so they can make the best calls for their organization and employees. This is where strong compensation management platforms that interact with the rest of the HR tech stack come into play. 

With the right tools and integrations, organizations can reliably collect financial and people data from a range of sources, analyze it through automations, and make objective decisions about how to manage compensation going forward. 

Specifically, compensation analytics helps organization determine:

The competitiveness of their compensation offerings

Whether or not compensation is distributed equitably across the organization

If they are accounting for regional discrepancies 

How to establish reliable compensation levels and bands 

It does so by automating and streamlining key areas of compensation management like:

Salary benchmarking

Pay equity auditing

Pay transparency 

Budgeting and forecasting

Skill gaps and future needs projections

Expense management and goals tracking

Market data comparison 

Labor cost analysis 

This helps HR teams stay on top of all key activities associated with strong compensation management, enabling them to make the right decisions, at the right time, for their employees and company. 

Examples of compensation challenges—and how to solve them

So far we’ve talked generally about the benefits of compensation management. But it’s also helpful to have some examples. Here are examples of how strong management strategies can solve specific compensation challenges.

1. Negotiating counter-offers

I recently shared an example of a typical counter offer scenario . When an employee receives a competing offer, their manager’s first instinct may be to match it. The key word here is instinct, which can lead to costly mistakes. Intuition can cause even the best managers and HR professionals to make poor judgment calls. The way to mitigate this risk is to look at the data—to find out how the employee compares to the rest of their team and what the market is paying for a similar role.

Compare compensation profiles, incentive rates, performance ratings, employee attributes to others on the same team or in similar positions. Armed with this information, managers can make informed decisions about whether or not to agree to the counter offer that are no longer based on emotion, but reality.

2. Investigating pay equity

Pay equity is a top concern across all industries. As Steve Boese urged, if companies haven’t done an internal compensation review across salary bands, job roles, gender, ethnicity groups, age, and tenure to check for any potential discriminatory treatment, then they need to put this on their priority list this quarter.

Use people analytics to get answers to important questions like: 

What is the variation for pay within different ethnic groups?

How do budgeted salary increases compare for male and female employees?

What is the variation in pay within the salary band based on age and tenure?

HR teams should look for insights that reveal how fair their compensation practices are. If they find any indication of discrimination, they must analyze that data further to uncover evidence that they can use in discussions with managers and executives to resolve the issue before it results in fines and other legal troubles.

3. Managing compensation costs

Performing internal audits like the pay equity example above can lead to company-wide changes to pay and benefits. Movements can lead to more hires and reduced turnover, as well as increased wage and benefits pressures at competing organizations. If HR teams find that their organization is behind the pack, it can be tempting to simply follow the lead of others. However, this can lead to wasted spending.

How, when, and where to change pay and benefits is a strategic decision that requires careful consideration of the total rewards strategy and prior analysis to ensure any money invested impacts the organization in the way intended. Presenting cost increases to the senior executive requires more than pointing to the fact that someone else is doing it.

Being able to back up the proposed solution with a clear analysis of the context around the business, as well as specific internal factors which impact the business is critical.

The company’s people strategy platform should be connected to business and financial data (in addition to HR systems) so they get a complete view of the impact compensation changes will have across the organization. This enables the HR team to check that pay is being added in the right places to support retention or drive performance instead of just a blanket addition to costs.

It also helps companies achieve the right balance of base and variable pay so they have the flexibility to adjust overall costs without resorting to a reduction in force during slow periods. In addition, companies gain the ability to plan out how cost changes will impact the organization in the longer-term so they can factor future budgeting and business results into their projections.

Recommended resources

Accelerate Your People Data Management Process

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10 HR Metrics Every Company Should Track

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Name Your Price: Compensation Negotiation at Whole Health Management (A) Harvard Case Solution & Analysis

Home >> Management Case Studies >> Name Your Price: Compensation Negotiation at Whole Health Management (A)

MBA students Monroe Davis asked a potential employer to determine your compensation package. This case Jim Hammer, president and chief executive officer of Total Health Department and Davis with a unique recruitment process, which raises the question of compensation and employee incentives , negotiation strategies and human resource management. "Hide by Brian J. Hall, Deepak Malhotra, Nicole Bennett Source : Harvard Business School 10 pages. Publication Date: June 30, 2008. Prod. #: 908064-PDF-ENG

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When Outsourcing Works

An ICM Managed Services case study of the Wacker Neuson Group

This case study documents the journey of the North American operation of German-based manufacturing company Wacker Neuson as they sought a better solution for managing their incentive compensation.

Industry: Manufacturing

Want to read a summarized version of this case study?   Click Here.

The Challenge:

An ICM process hanging on a single thread

Wacker Neuson first worked with OpenSymmetry in 2013 on the implementation of their original incentive compensation management (ICM) system – Varicent, now IBM ICM – to replace a web of spreadsheets and manual sales commission calculations. This ICM system, however, hung on a single thread – a sales compensation administrator who possessed all of the knowledge about the system and processes. She had structured the payouts and reports in a way that she understood but was not easy for others to pick up, due to a lack of ICM system process documentation.

Ultimately, Wacker Neuson recognized that they were carrying too much risk with the existing program and conducted an internal assessment, with the end goal being to improve their ICM solution.

Wacker Neuson turned to OpenSymmetry for help evaluating six key areas of their existing ICM solution:

1. Process efficiencies 2. System efficiencies 3. Data integrity best practices 4. Reporting and communication best practices 5. Program management best practices 6. Cost efficiencies

The Solution:

Outsourcing management of all ICM

In the fall of 2015, Wacker Neuson invited OpenSymmetry to lead an onsite workshop for a full review of their ICM system in order to start addressing the challenges and opportunities for improvement uncovered during the evaluation.

The workshop deliverables included:

• Detailed documentation of “as is” process • Process improvement recommendations • System mapping • System configuration update recommendations • Reporting enhancements

After considering their options, Wacker Neuson made the decision to outsource the operation of their ICM program through OpenSymmetry’s managed services offering, OS Edge .   An OS Edge team was trained on Wacker Neuson’s system, checking it for redundancy and ensuring that it utilized the most efficient resources and processes to reduce costs. The OS Edge team developed Standard Operating Procedures and took over management of the following aspects of the Wacker Neuson ICM process:

• Regular status reporting • Transactional processing • Accrual processing • HR update processing • Commission processing • Reporting and communication management • Customer and product updates/maintenance • Year-end processing and set-up • Incident management • Continuous improvement identification and execution • Quarterly business reviews

The Result:

Freedom to focus on impactful business drivers

By inviting OpenSymmetry to assess, improve, and own their ICM program, Wacker Neuson saw improvements in each of the six key areas initially evaluated:

1. Process Efficiencies: By applying best practices such as automating HR updates in the ICM system, OS eliminated unnecessary manual processes. Additionally, by configuring the native ICM password functionality, OS streamlined a once inefficient process of managing ICM passwords outside of the system. 2. System Efficiencies: By identifying key areas to streamline the technical configuration, OS made recommendations to reduce IT dependencies and quickly and easily make small plan changes. 3. Data Integrity: By aligning data fields and making recommendations to update SAP queries, OS increased the accuracy of customer and transaction data that was loaded. OS also made recommendations to automate data imports for a streamlined process. 4. Reporting and Communication: The OS team gave recommendations to improve real-time reporting, giving Wacker Neuson the ability to make better informed and more timely decisions. They also identified an opportunity to streamline communication for faster and easier commissions processing and approvals. 5. Program Management: By identifying additional resources and setting up a comprehensive documentation process, OS reduced the risk that once came from having just one compensation administrator hold all the keys to the ICM system. 6. Cost Efficiencies: By outlining best practices for managing exceptions, OS made the ICM program more efficient and decreased program management costs that once came from having a compensation administrator who spent countless hours configuring unwieldy rules to catch each and every uncommon exception.

Partnering with OpenSymmetry’s OS Edge team to operate their ICM program empowered Wacker Neuson to focus on their core business. They can focus on high priority organizational initiatives while having complete confidence that they have a best-in-class and cost-effective ICM solution.

If you’re interested to learn more about how OS Edge can help you take control of and get the most from your ICM solution, please email us at [email protected]

Want a summarized version of this case study?   Click Here.

ABOUT WACKER NEUSON Headquartered in Munich, Germany, Wacker Neuson designs and manufactures a comprehensive range of light and compact equipment and serves the global construction, agriculture, landscaping, oil and gas, and municipal industries. The company has corporate sales and service organizations in more than 35 countries, as well as nine plants around the world and an extensive dealer network. Behind the brand stands the Wacker Neuson Group, a corporation with around 5,500 employees and revenue of EUR 1.53 billion in 2017. OpenSymmetry partners with Wacker Neuson’s sales affiliates in the USA and Canada.

ABOUT OS Edge Managing incentive compensation is a continuous process that doesn’t end once an incentive compensation management (ICM) technology is deployed. OS Edge, OpenSymmetry’s managed services offering, was born out of our clients needing operational support beyond deployment.

The consulting team at OpenSymmetry delivers a full suite of ICM managed services . This empowers businesses to focus their efforts on what’s most important — their core business.

Wacker Neuson

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OpenSymmetry enables clients to achieve greater operational efficiency and get better sales results. We are a global consulting company specializing in the planning, implementation, and optimization of industry leading technology suppliers of sales performance management solutions.

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A Guide to Compensation Management

The role of compensation management holds pivotal importance in fostering employee satisfaction, engagement, and overall organizational success. The way businesses structure and manage their remuneration packages significantly impacts employee motivation, retention, and performance. Are your employees content with their compensation ? Are you leveraging a clear compensation strategy effectively to retain top talent and drive productivity? A staggering 23% of employees find themselves uncertain about the fairness of their compensation packages. This uncertainty directly correlates with their job satisfaction and engagement levels and is one of the top reasons why there should be a clear complete compensation strategy which contains all the vital information for employees to make an informed decision. Employees who question the fairness of their remuneration might be more prone to disengagement, affecting their overall performance and dedication to the organization's goals. When considering factors influencing employee retention, 46% of workers identify salary or bonuses as the primary motivator for staying with their current employer. It isn't just about monetary rewards; it symbolizes recognition, appreciation, and a sense of worth. It becomes a fundamental aspect influencing an employee's decision to stay committed to an organization. Beyond monetary compensation, benefits and wellness programs play a crucial role in employee retention. Studies show that employees satisfied with wellness programs and benefits provided by their employers are 1.6 times more likely to remain with the organization. Investing in comprehensive benefits not only boosts employee satisfaction but also contributes to their overall well-being, fostering loyalty and commitment.

Defining Compensation Management

Compensation management is your strategic approach to designing, implementing, and overseeing the various elements shaping your employees' total remuneration package. At its core, it isn't just that paycheck your employees receive each month. It's a comprehensive framework comprising monetary rewards, benefits, incentives, and non-monetary perks. These elements are designed to recognize and reward your employees' contributions, skills, and achievements within your organization.

Components of Compensation

As you dissect the components, you'll find it involves structuring and administering different forms of compensation:

• Monetary Compensation : This includes base salaries, bonuses, commissions, and any financial rewards tied directly to your employees' performance or tenure and are included in an employee's payroll .
• Benefits and Perks : Beyond money, it includes health insurance, retirement plans, stock options, flexible work arrangements, and other non-monetary perks aimed at enhancing your employees' overall well-being and work-life balance.
• Incentives and Rewards : Your incentive programs, recognition schemes, and rewards for exceptional performance are integral parts. They foster a culture of achievement and appreciation within your workforce.

Importance of Effective Compensation Strategies

Understanding the crucial role that effective payment management strategies play within your organization is key to unlocking higher levels of employee satisfaction, engagement, and overall business performance. The importance of having a clear strategy can lead to:

• Retention and Motivation - Your remuneration strategies are the backbone of retaining top talent and motivating your workforce. When employees feel fairly compensated for their efforts, they're more likely to remain committed and engaged. It's not just about the paycheck; it's about recognizing their value and contributions through a well-structured remuneration package.
• Attracting Top Talent - In today's competitive job market, attracting skilled and qualified individuals requires more than just a job opening. Your remuneration strategies act as a magnet for top talent. When your package stands out as competitive and enticing, it sets you apart as an employer of choice effectively increasing your employer brand .
• Performance and Productivity - Effective remuneration strategies have a direct impact on employee performance and productivity. When employees perceive a direct correlation between their efforts and rewards, they're motivated to perform at their best. This alignment between performance and it serves as a catalyst for increased productivity across your organization.
• Employee Satisfaction and Engagement - Your benefits strategies significantly influence overall employee satisfaction and engagement levels. When employees feel valued and fairly compensated, their morale increases, leading to higher levels of engagement. This, in turn, fosters a positive work environment and encourages a culture of dedication and loyalty.
• Cost Savings and Efficiency - Strategically designed benefits packages can also lead to cost savings and increased efficiency. By aligning rewards with performance, you ensure that resources are allocated effectively. This not only motivates employees but also optimizes your expenditure on compensation, maximizing your return on investment.
• Alignment with Organizational Goals - Your remuneration strategies should mirror your organization's goals and values. When these strategies align with your company's mission and objectives, they become a driving force in steering your workforce toward achieving collective goals. This alignment creates a sense of purpose and direction among employees.

In essence,they are more than just financial transactions; they are powerful tools that shape your organization's culture, performance, and ability to attract and retain talent. Crafting and implementing these strategies thoughtfully can have far-reaching impacts on your organization's success and growth.

Key Components of Compensation Management

Navigating this landscape involves understanding the fundamental components of compensation management. These components form the building blocks of a comprehensive and effective compensation strategy within your organization.

Salary Structure and Design

Your salary structure stands as a cornerstone of your benefits strategy, holding immense power to influence employee satisfaction, retention, and overall organizational performance. Your employees' compensation, including base salaries, bonuses, and benefits, forms the backbone of their financial security and satisfaction within the organization. A well-designed salary structure isn't just about the numbers; it's about demonstrating value and recognition for your employees' contributions.

Impact on Turnover and Retention

According to Harvard University, even a $1 per hour pay loss can lead to a staggering 28% increase in turnover . Conversely, a mere $1 per hour pay increase can result in a 2.8% increase in rates of retention . These statistics underscore the direct correlation between salary and turnover rates, emphasizing the critical role that it plays in employee retention.

Addressing Recruitment Difficulties

In today's competitive job market, offering competitive pay and benefits is becoming increasingly crucial. As reported, 36% of companies are enhancing their compensation packages to tackle recruitment difficulties. This trend showcases how organizations are recognizing the pivotal role of better pay and benefits in attracting top talent.

Aligning Salary with Employee Value

A well-structured salary isn't solely about competitiveness in the market. It's also about aligning salary packages with the value employees bring to the organization. Employees who feel their pay accurately reflects their contributions are more likely to remain committed and engaged.

Your salary structure isn't just a number on a paycheck; it's a reflection of your organization's commitment to recognizing and rewarding employee efforts. By ensuring fair and competitive compensation, you're not just investing in your employees; you're investing in the stability, growth, and success of your organization.

Performance Evaluation and Rewards

When it comes to performance evaluation and rewards, you hold the reins to motivate and guide your employees toward achieving their best. These components serve as powerful tools to incentivize performance and drive organizational success.

Linking performance to compensation creates a direct correlation between effort, achievement, and rewards. By establishing clear performance metrics and tying them to compensation, you're not only acknowledging hard work but also fostering a culture of meritocracy within your organization. Employees understand that their efforts directly impact their compensation, encouraging them to strive for excellence. This can be done in several ways.

The Role of Reward Systems and Incentives

Reward systems and incentives act as catalysts, igniting enthusiasm and commitment among your employees. Whether it's performance-based bonuses, recognition programs, or achievement awards, these incentives go beyond monetary benefits. They serve as visible tokens of appreciation, motivating employees to go above and beyond their regular duties.

Fostering a Performance-driven Culture

By integrating performance evaluation and rewards into your strategy, you cultivate a performance-driven culture. This culture encourages employees to set higher goals, continuously improve, and contribute meaningfully to the organization's objectives. It also creates a sense of fairness and transparency, where employees see the direct link between their efforts and the rewards they receive.

Encouraging Continuous Growth

Performance evaluation and rewards shouldn't be static; they should evolve alongside employee growth. Regular evaluations and timely rewards through continuous performance management provide employees with feedback and recognition for their progress. This not only acknowledges their achievements but also encourages continuous development and improvement.

Balancing Objectivity and Subjectivity

Striking a balance between objective performance metrics and subjective evaluations is essential. While objective measures like sales targets or project completion are crucial, subjective elements such as teamwork, innovation, and leadership qualities should also be considered. This balanced approach ensures a comprehensive assessment of an employee's contributions.

Legal and Compliance Considerations

navigating legal and compliance considerations is crucial to ensure fair and equitable practices for your employees. Understanding the laws and regulations governing employee leave, paid time off (PTO), and fair labor practices is key to upholding ethical and legal standards within your organization.

Laws and Regulations on Employee Leave and PTO

Various laws, such as the Family and Medical Leave Act (FMLA) and state-specific regulations, outline the rights and provisions for employee leave. FMLA, for instance, allows eligible employees to take unpaid, job-protected leave for specific family and medical reasons while ensuring they have a position to return to after the leave.

Additionally, laws governing paid time off, such as sick leave, vacation time, or paid holidays, may vary by jurisdiction. Some regions mandate employers to provide a certain amount of paid leave, while others leave it to the employer's discretion.

Compensation and Fair Labor Laws

Fair labor laws are designed to protect employees from unfair practices and ensure they receive fair payment for their work. These laws often include federal minimum wage requirements, overtime pay, and regulations on working hours. Compliance with these laws is essential to avoid legal issues and maintain ethical employment practices.

When employees take leave or utilize their PTO, ensuring fair pay involves adhering to these laws. For instance, compensating employees for their accrued PTO according to legal requirements is crucial. Fair labor laws dictate that employees must be paid at least the minimum wage and compensated for any overtime worked, providing equitable treatment regardless of leave status.

Upholding Fair and Legal Compensation Practices

To ensure fair and legal compensation practices, it's imperative to stay updated on relevant laws and regulations. Implementing transparent policies and procedures regarding employee leave, PTO accrual, and payment for such absences is essential. This transparency not only ensures compliance but also builds trust and goodwill among employees.

Moreover, conducting regular audits or reviews of your compensation practices helps identify any potential gaps or areas that need adjustment to align with legal requirements. Training your HR and managerial staff on these laws and their implications is also crucial to prevent inadvertent violations.

Crafting a successful compensation strategy involves an approach that considers industry dynamics, transparent communication, and adaptability to changing landscapes. By integrating these strategies into your strategy, you ensure a robust and agile framework that resonates with your employees and aligns with market demands.

Market Analysis and Benchmarking

Understanding industry trends and benchmarking your compensation practices against competitors is pivotal in shaping a competitive strategy. By conducting thorough market analysis, you gain insights into prevailing norms, ensuring your packages remain attractive and competitive. Benchmarking allows you to assess where your benefits stand relative to industry standards, guiding adjustments and enhancements.

Comprehending these trends is indispensable. Analyzing industry data provides valuable insights into prevailing salary ranges, benefit packages, and incentive structures within your sector. This insight arms you with the information necessary to calibrate your strategy to attract and retain top talent. This paves way to benchmarking. Benchmarking isn't just about assessing your own  packages; it's about understanding what your competitors offer. By benchmarking against industry leaders or similar-sized organizations, you gain a comparative advantage. This data-driven approach helps set realistic payment goals and positions you competitively in the talent market.

Transparency and Communication

Transparent communication regarding your compensation policies is the cornerstone of building trust and fostering a positive work environment. Openly discussing structures and criteria creates clarity and fairness, enhancing employee satisfaction and reducing misunderstandings or disparities. Transparent compensation policies empower employees with a clear understanding of how decisions are made. When employees comprehend the criteria and factors influencing their compensation, it fosters a sense of fairness and trust. This transparency also reduces potential grievances or dissatisfaction related to discrepancies. 

Effectively communicating your compensation policies involves clarity and openness. Provide detailed information about how it is determined, considering factors like performance, market rates, and internal equity. Regularly updating employees on changes or updates to these policies cultivates a culture of openness and trust.

Flexibility and Adaptability

Adaptability is key to maintaining a relevant and effective benefits strategy. Being flexible in response to market shifts, technological advancements, or changes in employee preferences ensures your pay policies remain aligned with evolving needs. This involves agility in modifying structures, benefits, or incentives to accommodate changing market conditions, industry trends, or shifts in employee expectations. Whether it’s adjusting bonus structures, introducing new benefits, or revisiting salary scales, adaptability involves responding proactively to changing needs. This flexibility not only attracts and retains talent but also positions your organization as adaptable and responsive, fostering a culture of innovation and progress.

Best Practices in Managing Compensation

Incorporating best practices ensures your strategies remain effective, responsive, and aligned with both organizational and employee needs. Regular evaluation, employee involvement, and feedback mechanisms stand as fundamental pillars in fostering an adaptable and employee-centric framework.

Regular Evaluation and Adjustment

Periodic evaluations of your strategies are pivotal in maintaining relevance and competitiveness. Conducting systematic reviews allows you to assess the effectiveness of your pay packages and make necessary adjustments to ensure they remain aligned with industry standards and organizational goals. Regular evaluations serve as checkpoints to gauge the efficacy of your strategies. By analyzing metrics, market trends, and employee feedback, these reviews provide valuable insights into the performance and impact of your payment practices. They allow you to identify areas for improvement or modifications required to stay competitive.

Adjustments based on evaluation findings are crucial for keeping your compensation strategies dynamic. Whether it's revisiting salary structures, redefining performance metrics, or enhancing benefit packages, making necessary adjustments ensures your payment packages remain attractive and aligned with employee expectations and industry benchmarks.

Employee Involvement and Feedback

Involving employees in compensation-related decisions and collecting their feedback play a pivotal role in shaping fair, transparent, and employee-centric compensation practices. This involvement not only fosters a sense of ownership but also provides valuable insights for refining compensation strategies. Employees' perspectives and insights into these practices are invaluable. Encouraging their involvement in discussions about pay fosters a sense of inclusivity and demonstrates that their opinions matter. Their firsthand experiences can offer unique insights into what works and what needs improvement.

Establishing channels for collecting employee feedback creates a culture of openness and responsiveness. It's not just about collecting feedback; it's about acting upon it. Analyzing feedback and implementing viable suggestions or addressing concerns show employees that their voices are heard and valued.

Challenges and Solutions in Managing Compensation

Navigating the complexities often presents various challenges that organizations encounter in ensuring fair, competitive, and compliant compensation practices.

By recognizing and addressing these challenges with the respective solutions, you can navigate the complexities effectively, ensuring fairness, compliance, and alignment with organizational and employee needs.

Effective benefits management stands as the linchpin in fostering a motivated, engaged, and satisfied workforce within your organization. The intricate interplay of market insights, transparent policies, and adaptive strategies ensures not just competitive pay packets but also a culture of fairness and trust. remember that it's not solely about numbers on a paycheck; it's about recognition, appreciation, and empowerment. By embracing market analysis, transparency, and adaptability, you set the stage for a dynamic strategy that resonates with your employees and propels your organization towards sustained success.

Empowerment through transparent communication, agility in adapting to evolving landscapes, and a commitment to fair practices will not only attract and retain top talent but also position your organization as an employer of choice. Your commitment to fair and equitable practices underscores your dedication to nurturing a workplace where talent thrives and where both organizational and individual goals harmoniously align.

Why OrangeHRM?

OrangeHRM offers a modern-day HRMS solution to help you automate your pay process. Our comprehensive solution helps you to keep your compensation strategy current with tools like Performance Management, HR Administration, PTO/Leave Management, and Time Tracking. We ensure that you have all the tools that you need to keep managing your compensation strategy better. Book your FREE demo of OrangeHRM today!

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Wayanad landslides: Unity, observation & studies can provide solution to disasters

When climate change and global warming pose a threat to human existence, new means are necessary for survival. This is the third and concluding part of ‘Heart of Disaster’, an analysis of the savage landslides by John Mathai, Scientist (retired) of the National Centre for Earth Science Studies, Dr S Sreekumar, KILA's expert in disaster management, and Director (retired) of the Integrated Rural Technology Centre in Palakkad, and Dr Girish Gopinath, Head of the Climate Variability and Aquatic Ecosystems at KUFOS. (Part 1: A master plan swept away in nature’s fury Part 2: Wayanad landslide not man-made, result of extreme heavy rain )

We have to go beyond the warnings issued by the weather department to face natural disasters. We need to consider changes in nature to tide over such calamities. Doors and windows suddenly refusing to shut, cracks appearing in the foundation, floors, and cove joints, and changes in water flow in brooks on rocks, all point towards a possible landslide. Rivers turning muddy, too, is a warning signal.

According to a KUFOS (Kerala University of Fisheries and Ocean Studies) study, Idukki, Palakkad, Pathanamthitta and Malappuram districts, too, are high landslide-prone districts. The study noted that fool-proof early warning systems and scientific land use are necessary to lessen the impact of landslides.

End blame game The crop pattern at Mundakkai and Chooralmala in Wayanad's Meppadi panchayat cannot be totally blamed, since the landslide had occurred deep inside the forest. Crops will be damaged when water brings with it uprooted trees and loose boulders. Copious amount of water was discharged from a dam-like formation — the result of the first landslide — in the second landslide. The waterbody's elevated position added to the impact.

The landslide mass that rolled down the mountain naturally caused much destruction in the human settlements at Mundakkai and Chooralmala. It could be said that the loose topsoil in farmlands was easily swept away. Constructions in spaces where the earth was levelled were destroyed. In fact, the landslide was of such a magnitude that other constructions, too, could not withstand it.

It cannot be ignored that inaccurate warnings, constructions close to the river, and unscientific land-use patterns added to the magnitude of the landslide.

Rocks and trees could be used The boulders and trees that have accumulated at the scene of tragedy could be put to good use and survival. Boulders : They can be used in developing basic infrastructure facilities like roads, bridges and buildings. They can also be utilised to construct landslide-preventing walls. Uprooted trees: The timber could be used after processing the trees scientifically.

Benefits 1. Clear debris - If used properly, the accumulated boulders and trees would reduce the exploitation of natural resources and its impact on nature. Additionally, the debris now formed would be cleared. 2. Financial benefits - The boulders and trees, if used, would help in saving funds otherwise required for purchasing construction materials. 3. Employment - Processing the debris and converting it into raw construction materials employ several people, including locals. 4. Environment - The accumulated rocks are of good quality. Rocks necessary for construction could be sourced from the debris. It would obliterate the need for opening more quarries.

Note to government Recommendations of the team that studied the situation at Mundakkai-Chooralmala, on behalf of Manorama.

• Ensuring safe shelter and land for all should become a social responsibility • Conduct a study to identify inhabitable areas • Landslide-probability maps should be drawn up for other under-threat areas in Meppadi panchayat. Identify impact zones. • Classify land based on elevation and soil structure. Formulate guidelines for each zone. • Encourage construction only in safe zones. • Ensure buildings in landslide-prone areas are constructed in adherence to safety norms. Their designs should be geographically suitable. •Seal tree throws properly after large trees are axed for development purposes.

• All local bodies should formulate disaster management policies. The government should have clarity on disaster management projects to be included in the next annual plan, availability of funds, and organisation. • Regulate tourism by considering the capacity of the place. • Set up landslide warning systems at the local level with the help of science and technology institutions. • Make local residents aware of disaster possibilities, and equip them to act effectively in emergencies.

The Darjeeling model Darjeeling in West Bengal has a relatively similar landscape to that of Kerala. Situated in the Himalayan foothills, Darjeeling is also prone to landslides and earthquakes like Kerala, which has the Western Ghats in the east. The West Bengal government, in association with the Geological Survey of India, has set up a People-centric Landslide Early Warning System in Darjeeling. Kerala could replicate the model.

Intervention in Darjeeling • Rain gauges are set up at prominent places in villages. People are trained to measure rain, and resource persons appointed to aid them. • The resource person reports to the local administration and GSI officials daily after observing rain. • Impact studies are carried out at regular intervals. Awareness campaigns are conducted after preparing a landslide-possibility map.

• Special patrolling in landslide-prone areas during the rainy season. • A nodal officer at the panchayat level for disaster management. • Post of disaster management officer opened at every three-tier panchayat. • Rescue mock drills at regular intervals.

Let's overcome together We should realise that we are living in an age in which natural disasters have become regular. While constructing a house, the location should be identified only after considering the local disaster management plan. Characteristics of the soil, and surface, too, should be taken into consideration. The construction should be carried out following the soil's weight-bearing capacity. Unscientific construction of roads and buildings by cutting through hills should be avoided.

A technical committee comprising a geologist, geotechnical engineer, and pedologist should be formed at the district level. This committee should decide the type of construction suitable for landslide-prone areas. Our future development policy should be formed considering possible extreme climatic conditions. Society has lots to do to mitigate tragedies even as we now blame rain for the disaster.

Coordination: Shinto Joseph

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Embracing Gen AI at Work

• H. James Wilson
• Paul R. Daugherty

The skills you need to succeed in the era of large language models

Today artificial intelligence can be harnessed by nearly anyone, using commands in everyday language instead of code. Soon it will transform more than 40% of all work activity, according to the authors’ research. In this new era of collaboration between humans and machines, the ability to leverage AI effectively will be critical to your professional success.

This article describes the three kinds of “fusion skills” you need to get the best results from gen AI. Intelligent interrogation involves instructing large language models to perform in ways that generate better outcomes—by, say, breaking processes down into steps or visualizing multiple potential paths to a solution. Judgment integration is about incorporating expert and ethical human discernment to make AI’s output more trustworthy, reliable, and accurate. It entails augmenting a model’s training sources with authoritative knowledge bases when necessary, keeping biases out of prompts, ensuring the privacy of any data used by the models, and scrutinizing suspect output. With reciprocal apprenticing, you tailor gen AI to your company’s specific business context by including rich organizational data and know-how into the commands you give it. As you become better at doing that, you yourself learn how to train the AI to tackle more-sophisticated challenges.

The AI revolution is already here. Learning these three skills will prepare you to thrive in it.

Generative artificial intelligence is expected to radically transform all kinds of jobs over the next few years. No longer the exclusive purview of technologists, AI can now be put to work by nearly anyone, using commands in everyday language instead of code. According to our research, most business functions and more than 40% of all U.S. work activity can be augmented, automated, or reinvented with gen AI. The changes are expected to have the largest impact on the legal, banking, insurance, and capital-market sectors—followed by retail, travel, health, and energy.

• H. James Wilson is the global managing director of technology research and thought leadership at Accenture Research. He is the coauthor, with Paul R. Daugherty, of Human + Machine: Reimagining Work in the Age of AI, New and Expanded Edition (HBR Press, 2024). hjameswilson
• Paul R. Daugherty is Accenture’s chief technology and innovation officer. He is the coauthor, with H. James Wilson, of Human + Machine: Reimagining Work in the Age of AI, New and Expanded Edition (HBR Press, 2024). pauldaugh

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