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Article | Beyond Data

Top 5 compensation priorities for 2022

By Sambhav Rakyan | January 11, 2022

Where compensation professionals should focus to future-proof their organization’s rewards strategy and reinvigorate their employee value proposition.
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Beyond Data

Despite record-high job openings globally, The Great Resignation continues to challenge organizations. Many are losing more employees than they can attract, yet they are holding fast to the same reactive practices that have been in place for decades (e.g., retention bonuses, off-cycle adjustments, counteroffers through salary increases or promotions).

In 2022, there are five key areas on which compensation professionals should focus to bring their organization’s total rewards strategy and employee value proposition into future readiness and resiliency.

  1. 01

    Transform your compensation review process

    Given changing employee expectations, accelerated digital transformation and increasing cross-industry skills prevalence, relying just on traditional practices and data around the annual compensation review isn’t enough for your organization to ensure its offering is constantly competitive.

    A holistic approach requires access to an expanded pool of compensation and benefits data that includes all industries as well as non-traditional peers and markets. Along with pay practices, it is critical to look across HR practices (e.g., employee leave, severance policies, company car benefits), benefits design and competitiveness, wellbeing (including emotional, mental, financial and social), and careers (e.g., skills development, opportunities for advancement).

    This future-focused mindset allows your organization to better prepare for human capital challenges and design a comprehensive Total Rewards package that resonates with today’s workforce. It also leads to an understanding of the potential impact and efficacy of certain strategies (e.g., hiring bonuses, skills premiums, starting salaries, training opportunities) to attract and retain talent.

  2. 02

    Elevate your role to become a strategic business partner

    As a compensation professional, when you actively partner with the business to determine and understand talent requirements, you more effectively help to future-proof your organization’s compensation strategy.

    Developing a business partnership mindset – by ensuring your compensation team is informed of the organization’s growth plans and specific talent attraction and retention issues – allows you to plan and react to challenges with proactive data-driven analytics. Ensure your compensation team plays an active role in guiding the business on how to address competitive external compensation pressures while at the same time maintaining internal parity. This will:

    • Protect the business from short-term fixes that may create long-term problems (e.g., unfair pay, unbalanced distribution of salary budgets)
    • Help the business focus on better workforce planning strategy (e.g., keep the workforce relevant, resilient, agile, adaptive to market changes)
    • Differentiate the organization’s employer brand amid a war for talent

  3. 03

    Look beyond compensation to drive retention

    In 2022, it is crucial that organizations disrupt traditional thinking and take a proactive, purposeful approach to understanding the factors impacting their talent retention strategy. For example, Willis Towers Watson’s report on the Employee Experience Stress Test found that the primary drivers of employee retention in high-performing companies are not just about compensation but also include:

    • Support for employees to achieve their career objectives, develop and grow
    • A fair relationship between pay and performance (i.e., rewarding employees fairly for work done)
    • Opportunities for employees to learn new skills, with performance evaluated fairly
    • Support for workplace diversity and equal opportunity for all employees
    • Communicative and open leadership (i.e., encouraging employees to give their best)

    While competitive compensation will always be a key factor in attraction and retention, it clearly is not the only factor employees consider when choosing where they work. Reinvigorate your employee value proposition to emphasize purpose, community building, continuous support, innovation and learning. This will provide a showcase for aspects of your employee value proposition that go beyond compensation.

  4. 04

    Consider the impact of remote work on pay

    Pre-pandemic, the war for talent led many organizations to look within their existing talent pool and upskill employees to close skills gaps. But COVID-19 sparked the rapid growth of the global remote-work culture, and that opened doors for talent availability. Skills could be found and based anywhere. This resulted in new sources of talent for employers – and new and potentially better career and salary growth options for employees.

    Willis Towers Watson’s July 2021 Salary Budget Planning Survey found that many organizations around the world have yet to address the impact of remote work on pay and Total Rewards. Underestimating the urgency of determining fair and appropriate adjustments to compensation could heighten your talent attraction and retention risks.

    While most organizations have not made location-based changes to salaries, this topic will remain top of mind as remote or hybrid work becomes more prevalent – or even permanent – in many workplaces. Work with leaders in your organization to consider:

    • What are the costs and benefits of any pay changes related to remote working?
    • Will integrating flexibility lead to a significant competitive advantage when attracting and retaining talent?
    • How will geographic differentials be applied? Will this affect the organization’s commitment to pay equity and pay fairness?
    • What regional and/or country regulations need to be considered when implementing remote work policies?

  5. 05

    Integrate environmental, social and governance goals

    Transformative organizations that excel at inspiring a clear sense of purpose in employees are likelier to experience a positive impact on organizational culture (+44%), employee engagement (+35%) and financial outcomes (+7% over a three-year change in gross profit margin). A sustained and transparent commitment to environmental, social and governance (ESG) goals could also become a key differentiator for employer branding as well as a driver for talent attraction and retention.

    In 2022, employees, customers, and investors will expect their organizations to keep moving forward with ESG efforts. For example, from an environmental perspective, green initiatives prompted 43% of UK organizations to introduce more environmentally friendly options in their company car policy, and 27% reduced care travel through new work-from-home policies.

    From a social responsibility point of view, employees want their leaders to commit to prioritizing wellbeing, enhancing diversity, equity and inclusion, and developing flexible work policies – including aligning Total Rewards programs to support flexibility.

    Finally, from a governance perspective, boards of directors recognize the importance of acting on ESG, including incorporating climate and other ESG-related metrics in pay. In fact, 51% of S&P 500 companies used ESG metrics to reward executives in their annual incentives as they entered 2021, and that is expected to continue. Look to integrate ESG targets in your executive incentive plans to signal your organization’s increase focus on the importance and consequences of these initiatives.

    A new year requires a new approach

    “But this is how we’ve always done it, and it’s always worked” is the single mindset that will drive an organization out of business faster than your most discontented employee can say, “I quit.” Yes, other disruptions in recent decades have initiated shifts in our approach to compensation. But now, in 2022, it is critical for HR and compensation leaders to disrupt traditional thinking, programs and practices to build an organization that is agile and resilient enough for the future.

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Global Business Leader, Rewards Data Intelligence
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