By Steven Cox
In the past five, 10 and even 20 years, the world has changed beyond recognition. Now, we can ask smart speakers for directions rather than consulting a map, our shopping is delivered to our house in 24 hours and we use a handheld scanner to do our shops, linked to a virtual currency card.
However, compensation strategies have largely not changed in the past few decades.
Reflecting a modern world
The modern world is dynamic, fluid and ever-changing. Trends roll in and out within a few days, yet rigid compensation strategies fix us to a set way.
Similarly, compensation doesn’t always reflect the sustainability, agility and automation society demands.
Now, companies are using revolutionary ideas such as self-set pay to reflect the way of the world. But how do you know what theories are right for you and your company, and what are the best ways to adjust a compensation strategy.
Agility is the key
With remote working, flexible approaches to time in office and many companies choosing a hybrid return to the office, having a compensation strategy that is agile for each employee and situation is the key to sustained growth.
Agility could mean flexible pay structures that scale as the company turnover changes. It could also mean choosing a payroll provider that can provide digital payslips to promote paper free living. Our ideas of choice are:
- Create a system that lets individual and company growth happen in parallel. As compensation is around 70% of a business’s outgoings, it’s important to ensure that the compensation is fair and scalable. You also don’t want to let the company grow but leave your team feeling disgruntled that their part in getting the company to succeed isn’t rewarded.
- Think about teams and middle managers in your compensation growth plan. Perhaps you don’t have any right now but as times change, team positions may change, and compensation should reflect that.
- Don’t provide compensation purely on case by case alone. While an individual’s circumstances may reflect their compensation those in similar roles should be compensated at a similar rate.
Reflect externally with your compensation
Whether you’re branching into a new country, or simply wanting to modernise your compensation plan, looking at the current environment and general feelings towards compensation, will help to ensure external stakeholders and potential customers see the company as a fair employer.
Whether this is committing to the Living Wage policy, or ensuring you pay above a similar standard, all of these can help your employees to feel valued as an employee. For example, less than 10% of those surveyed by Deloitte thought that fairness of compensation relating to the national living wage was a priority, which contradicts the growing external stakeholder opinion.
Case Study: Unilever wanted to ensure that all their employees were paid at least the living wage in their country. With branches in multiple countries, Unilever have made it their goal to ensure that everyone who provides goods and services to Unilever receives a living wage or income by 2030. In 2020, they achieved a living wage for all employees, both factory and non-factory, across every country, and regularly check factors externally reflect this. Working with governments, NGOs and similar helped Unilever to maintain a living wage.
Remove pay secrecy banners
Opening up discussions around pay supports a healthy workplace, ensures that there is no hard feelings towards pay and lets people know that there is no reason to think anyone is being paid higher.
“Pay secrecy is likely to undermine the sense of pay equity or pay fairness in the organization. Over time, if you have transparency, people are more likely to be paid what they’re worth,” said Denise Rousseau, professor of organizational behaviour and public policy at Carnegie Mellon University. “That’s beneficial for both retention and a sense of organizational justice. And we know that organizational justice and trust in senior management are very closely tied.”
While there’s no need to constantly encourage pay discussions everyday, allowing conversations to happen if necessary to ensure that employees can see there is a logical compensation strategy.
Ensure employees aren’t discriminated based on location
As remote working has driven up in popularity, especially as basically everyone had to work from home for some time during the past year, not detracting pay because of an employees working status is key.
Zapier, a large no-code automation company offers a ‘de-location’ incentive to allow employees to work from anywhere. CEO Wade Foster said in 2017, “We’ve long embraced remote working. And think you should be able to work wherever you want and still work at a place that helps you achieve your career goals. So if you’re living in the Bay Area but thinking about making a change that will improve your family’s standard of living, we’re eager to help. Zapier will provide up to $10,000 to help relocate you and your family to your new home outside the Bay Area.”
Facebook recently came under intense scrutiny for their pay deduction scheme for remote workers, as they announced they would be removing the “San Francisco” bonus from any employee that moved away. While Mark Zuckerburg seems dubious around the future of the workforce, one thing is certain. A changing world means changing attitudes to compensation.
Compensation for automation
Growing artificial intelligence systems, from chat bots to no-code platforms, mean that some jobs are having processes removed and automated, or the time taken to do sped up.
As such, the World Economic Forum estimates that 42% of skills required by the workforce in 2018 will have significantly changed by 2022, and around 54% of existing employees will need upskilling to some degree by then. COVID will have changed this, with overnight upskilling surrounding online and remote working, as well as new platforms such as file systems.
About the Author
Steven Cox, Chief Evangelist at IRIS FMP, a leading global international payroll provider to SME organizations offering a wealth of services and solutions to help keep international payments efficient, reliable and in line with their business goals.