Why it’s Time to Rethink Employee Compensation

Employee compensation has been a hot topic of discussion since people have been working for each other. In other words, someone has wanted to get paid more, and someone has wanted to pay less, since the beginning of commerce.


It might seem hyperbolic, then, to say that employee compensation is particularly important today. According to the Economic Policy Institute, there are massive disparities in employee compensation today.


Some of the more obvious discrepancies run along racial and gender lines. These have been well-known and documented for a long time. But there has been another trend over the past four decades in the United States: increasing gaps between how much is made by the highest-paid workers and everyone else.


While many have been saying this is an issue for years, we’re now really starting to see the fruits of these misguided labors. Due to the COVID-19 pandemic, labor shortages have increasingly become a frequent phenomenon, as many workers have determined the risk-reward of their job simply doesn’t make sense. These factors and more are why it’s time to rethink employee compensation.


Why It’s Time to Rethink Employee Compensation

While considering employee compensation from an employer’s perspective, it can be easy to justify certain presumptions—especially when they fit nicely into the bottom line. Some will even say certain low-skill positions are paid too much for doing what’s seen as “easy.” When faced with the reality-checking questions of “Would you do this job for this level of compensation?” or “If this is really such a great gig, why don’t you do it?” many will shirk away.


The importance of rethinking employee compensation, however, doesn’t only apply to those working lower-wage or entry-level jobs. It’s also critical for those who are at the senior level as well. To illustrate this point, tech giant Apple recent awarded some of its top-performing engineers bonuses as high as $180,000. They didn’t do this just to who how much they appreciate their staff; they did it because other companies, such as Meta, have been poaching their workers with more enticing offers.

As you can see, there are several strong motivations for rethinking employee compensation. But what all goes into employee compensation, and how can enterprises keep their workforce satisfied?


What Constitutes Employee Compensation?

In the past, employee compensation has been synonymous with one thing: your paycheck. This has changed, however, as employees’ preferences and workplace cultures have evolved over time. One example of this is the growing breadth of wants employees have when it comes to total benefit plans.


People in a full-time position are of course going to expect things like healthcare as a benefit. But this is really only the tip of the iceberg. Does your organization offer people options for how they build their healthcare plans? Do you have benefits like health stipends, extra vacation time, or other perks? These are the kind of diverse compensation packages that are appealing to employees today. Simply assuming the prior status quo will do isn’t going to cut it with top talent.


How Should Enterprises Adopt New Compensation Plans?

So, now that you see some of the motivations for rethinking employee compensation, it’s time to put these principles into practice. Probably the best route for revamping employee compensation is to partner with a consulting firm with expertise in this area. A consulting group can help you achieve total compensation goals in a few ways:


  • Building a strategy from the ground up – By leveraging past knowledge with data from your enterprise’s workforce, a consulting firm can figure out exactly what priorities need to be addressed in compensation packages.
  • Give people more freedom while becoming more agile – Leaning into remote and other unorthodox work models can pay dividends for organizations and employees alike. Many individuals prefer to be completely remote, while others like to have some kind of a hybrid setup. Either way, the enterprises that were already utilizing remote and hybrid models were far more prepared for the challenges posed by COVID-19.
  • Happier employees do better work – No one wants to give their best effort when they don’t feel appreciated and aren’t particularly thrilled with their compensation. Finding the right incentives for each employee will build a stronger culture and more loyalty.


It’s a mistake for organizations to continue building total compensation plans as they have been in the past. Times have changed and employee rewards need to shift with them.


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