To accelerate the pace of change in the workplace, a lot of work is being done. First, the employer has lost power. We are now in an employee’s market where companies fight tooth and nail to get the best talent. Due to the increase in pay grade information, the employees know how much money there is in the market, so they are not scared to ask for fair wages.
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At the same time, the composition of the workforce is changing. By 2025, millennials will account for 75% of the world’s workforce. Compared to previous generations, this generation has different preferences for interacting with employers and inevitably reforms the important content of corporate culture. In addition, technology allows employees to work anywhere, making it easy for organizations to hire talent on-demand worldwide.However, always make sure you hire the right employee for your company.
These factors make agile rewarding strategies that adapt to the pace of change more important to organizations than ever before. Is your compensation plan like an ocean liner or speedboat?
Rigid structures: The enemy of agile
The traditional grade-based structure is the expected standard for basic payroll management, but many organizations are now aware of the limitations and complexity they cause.
The principle of operation of the grade-based salary system is as follows: the HR department committee usually determines a specific grade or level covering all positions (10, 20, 24, etc.) and assigns each position to a degree. The wage level is usually defined by the level of responsibility performed in the job, the quantity of appropriate experience necessary for the job, the authority used by the position, and employees’ competence in the job. For example, the CEO is positioned at level 14, the product VP is positioned at level 12, and entry-level engineers (personal contributors) are positioned at level 4.
If you have hundreds or thousands of positions to handle, pay grades can ease the burden of payroll management. In addition, pay grades can be a helpful framework for streamlining compensation if market data is not found to price jobs. If this happens, you can grade the work based on your best judgment and use that grade to motivate the salary for that position.
However, if the market is very unpredictable and the makeup of the workforce changes rapidly, hierarchy-based structures can be restricted. Pay grades add a layer to the decision-making process. In an era when workers have multiple work options, pay grades may prevent you from moving fast enough to acquire or retain the highest talent.
What does an agile compensation strategy look like?
The agile payment system has the following qualities:
- Provides functions to increase or decrease compensation expenses as business needs change (for example, when high sales turnover needs to be addressed).
- Respond quickly to market changes (competitiveness) by minimizing dependency and the number of agreements required.
- Employee demographics will change over time, allowing them to continue to meet their needs and preferences.
Suppose you want to hire 10 new data engineers to configure a new e-commerce business and never hold these positions. How to determine their pay grade?
You can also use reasonable methods to find and scope the pay grade that suits your position (for example, find other positions in your company with similar scopes and skill requirements, and get the average salary for the position). ). But the question is, can you be confident that your salary is reasonable?
Be flexible with job compensation and automation
As technology has developed and changed, the return on automation work has also increased. For those who automate their businesses, this requires adaptable and scalable rewards and chances to increase skills.
According to the The Future of Jobs Report 2018 from the World Economic Forum, 42% of the skills needed by the global workforce will alter between 2018 and 2022. By 2022, more than 54% of all employees will need a lot of skills upgrades. That must be mirrored in the reimbursement of workers. Skills should be improved, particularly for those who may have difficulties, and compensation plans should be implemented.
Studies show that lack of adequate development and growth chances is one of the leading causes for people leaving their jobs. Today, many workers do not want to “climb the ladder” in a straight line. Young workers prioritize learning and development. They choose to move to different roles and departments to develop new skills and gain broader visibility.
Suppose you are using a grade-based composition. What if the employees were pleased about the new status, but moving to the new position means being on a lower grade scale? Will this prevent employees from relocating because it feels like a downgrade? Or do you transfer lower positions to higher salary scales to persuade employees to take on new positions? If you do, is it just once, or does it move permanently?
If you use a work-based time frame, these issues can be resolved entirely. Evaluating each position individually makes it easier for employees to know that their salary is based on the market demand for that position. That way, they can make their selections about what makes the reason for their career without bothering about optical issues (for example, one position is more “junior” or “senior” than another).
Maintain a compensation package plan that reflects society
With the development and changes of society, such as salary and leave after implementation, sharing of parental leave, etc., the era of employers and HR professionals has arrived. Such as, in Deloitte respondents, less than 10% believe wage fairness relative to the national living wage is a top priority, which is inconsistent with the views of external stakeholders.
A survey of Swedish workers found that fair treatment leads to increased employee inspiration and healthier lifestyle decisions. Compensation is no longer just a necessity, and it’s a method to show that we value our employees and society as a whole.
That reflects the growing tendency of buyers to choose brands that handle workers fairly and compensate appropriately in all areas. The rise of BCorp and similar sustainability goals for businesses have only speeded up the demand for fair and transparent compensation. Fair compensation forms part of retaining employees and will always come with a cost. However, failing to do so can incur an even bigger one. A company’s employees are its valuable assets. If you fail in retaining your employees, here are 5 ways to increase employee retention.
Plan for the future
Compensation is usually done on a case-by-case basis, particularly for start-ups and small businesses, and while compensation works quickly, it will become increasingly complicated over time.
By formulating a salary plan early on, you can create a healthy wage culture and a fair work style. But how did you do it? Well, you can:
- Parallel planning for personal and corporate growth. Instead of excluding compensation from your overall business strategy, adjust it as your business grows. Then so will the team.
- The plan must include bonuses and stock payments.
- Consider your team in a pay raise plan. There may be no one at the moment, but over time, the team’s position may change, and the rewards need to reflect this.