In the changing world of work, compensation needs to keep up. With sustainability and equal rights on societies agenda, companies are under serious scrutiny to meet basic standards of pay. Research conducted by Deloitte showed that 64 percent of respondents expected their organizations to redesign compensation yet again either this year or in the next three years.
Is this a pandemic driven change or simply a natural change that has been catalysed by the changing nature of the world?
High cost, less time attributed
Labor costs accounts for 70 percent of expenditure, yet HR professionals only spend 15 percent of their time on it. With HR professionals wanting to develop their workforce, attract the best talent and ensure career growth, revisiting compensation and benefit strategies regularly is an area missed out on.
While budgets are tight and restrictive, perhaps cost cutting is active, reducing salaries and related benefits can cost you people. In turn, this will end up costing you more over time as hiring and new demands for good talent require extra funds, as well as a potential lapse for business output.
Compensation for equality
Various studies of women, conducted across the U.S. have shown that victims of compensation inequality are twice as likely to be depressed as those adequately compensated. While money doesn’t equal happiness, financial freedom, adequate medical insurance and enough money to live on all contribute to overall better health.
The lead author of a study by Columbia University said, “If women internalize these negative experiences as individual-level issues, rather than the result of structural discrimination, they may be at increased risk for depression and anxiety disorders.” Referring to the depression held by those who are victims of a systematic failure, women are blaming themselves for a fault they have no control over. Comparatively, women who held the same qualifications and level of job than that of men, and were paid the same, didn’t have any noticeable trends of depressive orders and, overall, were happy.
Ensuring your compensation strategy eliminates inequality will not only help on a person-by-person basis, but it also has potential on a society wide level to reduce the gender pay gap.
Growth matching business to employee
When starting a business, or one in early funding rounds, creating a compensation plan for the years to come ensures steady and regular growth that matches that of the company.
If we liken this to an electrical circuit, building a circuit in series is good when small, as components can easily be added or taken away, but when it gets too big, finding the error or switching parts out creates higher risk for breakage. Whereas a parallel circuit, where each element is added on its own separate section means adding parts doesn’t affect the performance of any other.
Imagine this but with your compensation strategy. Creating elements that can easily be scaled, don’t affect growth or performance of others, and don’t require extensive shuffling to ensure steady performance means that as your company upscales so can your workforce.
Reflect society with compensation
Whether you’re branching into a new country, or simply wanting to modernise your compensation plan, looking at the way of the world 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. For example, less than 10 percent 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.
*Authored by Steven Cox, Chief Evangelist at IRIS FMP, a leading international payroll provider to SME organizations. www.fmpglobal.com