As human capital becomes scarce, flexible compensation can help attract and retain talent – TechCrunch

The great resignation is one of the most significant events in recent American history. We are seeing a post-COVID-19 generation refusing to work under the same conditions as before. The United States faces the biggest labor shortage of the decade, and jobs that require high-demand skills are harder than ever to fill.

Medium-sized companies find it particularly difficult to retain qualified staff. Faced with significant resource constraints, shrinking budgets, and workers’ demand for flexible solutions, the problems of SMEs are as important, if not more important, than those of large organizations.

One way to make your business attractive is to develop compelling compensation strategies and increase transparency and pay equity. Employees don’t always leave or stay because of their pay, but an opaque model of compensation allocation exacerbates feelings of disconnection and reduces engagement.

Let’s take a look at how startups can benefit from compensation analytics and how they can use the available data to develop a comprehensive compensation strategy.

Understanding the complexity of compensation

Pay equity is one of the most pressing social issues today, and any deviation can negatively impact reputation and relationships with the company.

The amount that lands in an employee’s bank account is only a fragment of today’s compensation plans. Compensation can consist of base salary, annual cash bonuses, and long-term incentives.

When mixing a compensating mix, there are different tradeoffs to consider:

  • Fixed versus variable compensation: Base salary versus bonuses.
  • Long-term incentives versus short-term incentives: Short-term incentives can take the form of annual bonus structures. Long-term incentives are generally stocks or other forms of compensation that vest over time.
  • Cash against equity: Equity can include stock options, restricted shares and performance shares.
  • Group incentives versus individual incentives: You can implement a percentage based salary increase for all positions or give bonuses to certain employees.

It is not ideal to have a uniform policy for all positions and departments. Managers should explain their reward decisions at the individual level, and compensation decisions should reflect the skills and contributions of each employee. In addition, companies are required to have varying budgets (eg higher income during vacation periods) and philosophies on their allocation.

Many make the mistake of sticking with an approach that doesn’t work strategically or doesn’t motivate the team enough. Instead, managers should collect data, work on various analyzes and scenarios, and design a compensation strategy that fits the business. This is where compensation management software comes in.

The devil is in the data

The data will help you understand where the talent market is heading and where your business is.

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