Why compensation?

Why compensation?


Typically, when we think about compensation, salary is the first thing that comes to mind. It is the first thing we check when we receive a job offer. The total compensation includes the base salary, annual bonus, and long-term incentives.

However, it is much more than that. Please note that this is not a discussion of benefits – they are a very important aspect of human resources that deserves a dedicated post of its own.

According to the Harvard Business Review, “10% higher base pay is associated with a 1.5-percentage-point increase in the likelihood that workers will stay at their current company the next time they move to a new role”. 

Compensation reflects how individuals are valued in an organization

In many companies, the process for deciding compensation is considered political or arbitrary. While other talent strategies have evolved, this part of the talent equation is lagging, with most opting for the traditional route.

Oftentimes it is seen as not “fair”. This has a huge impact on retention and turnover. Research has shown a direct link between perceptions of fairness and workforce well-being.

According to research conducted by Dr. Constanze Eib, a lecturer in organisational behavior at UEA’s Norwich Business School, and researchers from Stockholm University, “People who feel fairly treated are not only more likely to be motivated at work and go the extra mile for their organization, but they are also more likely to be healthy, have an active lifestyle and feel positive.” 

Compensation fairness is a constant challenge encountered in the workplace

In today’s digital age, we have an abundance of information that is readily available but scattered around. Navigating through this information excess is complicated. What makes it even more complex is the easy access to information, which influences the expectation of workers.

The workers of today can decide for themselves their relative values, especially seasoned workers. As a result, the traditional method of benchmarking compensation becomes outdated quickly. What worked yesterday may not work tomorrow.

The talent segment is changing with a more diverse workforce than ever before. Adding to that mix, innovations in business and technology are driving the evolution of job roles and the creation of new job roles that never existed.

In addition, there is a greater demand for transparency in the process.

There is a need for a continuous process of experimentation to adjust compensation.

Effective compensation strategy can help organizations to attract, retain, and engage the workforce in alignment with their overall business strategy. There is no one-size-fits-all solution; it is a continuous process of experimentation.

Organizations need to adjust and readjust their compensation strategies constantly. With advances in big data & AI technologies, it is now possible to predict trends in the market.

This is exactly what TalentUp is doing in the talent market. TalentUp analyzes huge volumes of data related to talent and compensation from various global and local job publications & self-report sites.

By analyzing this data, TalentUp can create salary models. The global nature of these data sources enables the AI technology behind TalentUp to create customized salary models for various positions, considering variabilities in factors such as location, industry, and competitors.

Since the data being used is recent and relevant, TalentUp can detect changes occurring in the market data and predict these changes in the salary model. This enables TalentUp to keep up with the constant flux of the talent market and provide an accurate view of it.

Recruiters have a crucial role to play

Benchmarking is half of the solution; it tells us what everyone else is doing. The other half is in understanding workers’ needs and preferences. To stay aligned with changing talent, companies need to listen to their employees’ needs.

This is where collaboration between recruitment and compensation can play an interesting role. After all, recruiters have a deep understanding of jobs and are speaking with talent every day.

Leveraging their knowledge, along with the market rate, can help companies design creative compensation solutions to get top talent. At the same time, companies have to maintain transparency by giving their employees a view of the decision-making process and also how they are being paid compared to competitors.

What’s your take on compensation? Does your organization consider it strategically important to attract and retain talent or just something to tick off from a to-do list?

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About Author

Yania Nada

Sales & Partnerships Lead. Yania is a startup enthusiast who enjoys supporting businesses in their development. She enjoys going on nature hikes and gaining knowledge via hands-on experience.