Having a compensation philosophy and strategy is becoming increasingly important for companies to distinguish themselves as top performers. Larger businesses often have a dedicated team or person responsible for compensation management. They are tasked with moving beyond basic salary data and market pricing for pay increases, and cash rewards for high-performing employees.
The talent crunch is also prompting companies to invest in more sophisticated compensation management systems.
Payscale’s 2023 Compensation Best Practices Report found that 84% of organisations had a compensation plan or were working on one. Still, five out of 10 businesses did not hn underlying compensation philosophy or strategy, or were unsure if they did. Some organisations did not believe this was necessary or lacked the knowledge and resources to be strategic about compensation.
Compensation strategy also encompasses pay equity, which has been gaining momentum since even before the pandemic. Women globally earn about 37% less than men in similar roles, according to the World Economic Forum.
Pay equity became even more critical as the pandemic revealed inequalities affecting women, people of colour, and ethnic minorities in the workforce. The report shows that about two out of three respondents said pay equity was a planned or current initiative at their organisation, with five out of 10 respondents planning to perform a racial and/or gender pay equity analysis by the end of the year.
However, the survey also found that 13% of organisations were not interested in taking action on pay equity at all. The main reasons given were: lack of preparation, including inadequate pay structures (25%), as well as companies thinking they were too small for such analysis (24%).
Moreover, some employers felt they did not have pay equity problems, despite not measuring for them (18%), or had decision makers who dismissed pay gaps as irrelevant (6%).
For organisations that seek to assess their pay equity and do it continuously, the use of compensation technology will become an essential trend for HR in the coming years to stay ahead of the curve.
Read the full The Innovation Rules: How Compensation and Benefits Strategies are Evolving in 2023 report here.
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