The compensation and total rewards function has changed so much in recent years. Between remote work, the Great Resignation, wage growth, and pay transparency laws, your current HR tech stack may no longer meet your organization’s needs.
The right compensation and rewards platform can provide the insights you need to make compensation your competitive advantage. Not all platforms are created equal — some will be better suited to your team's strategic priorities and goals. Keep those in mind as you evaluate compensation and rewards platforms so you can find the right solution for your team.
Pay transparency is gaining steam
Many companies are increasing pay transparency, either because they know it drives better business outcomes or because they’re required by law to do so. That means your team members may be able to see your company’s salary ranges on job postings or discuss salary ranges with you directly. Will they like what they learn?
High competition for talent and the subsequent rapid wage growth could mean you’re offering higher starting salaries for new employees. This could result in salary compression or salary inversion, impacting employee morale and retention. The right compensation analytics platform can help you identify and address these inconsistencies in pay so that an increase in transparency can be a net positive for your team.
Learn how The Motley Fool uses Compaas to make strategic pay decisions and hold transparent conversations around pay with team members.
Pay inequities persist
Pay equity isn’t just the right thing to do, it’s legally mandated and has many business benefits. But despite this, people from historically marginalized communities still face significant wage gaps. Women earn 83 cents for every dollar earned by non-Hispanic white men, Black men earn 87 cents, and Latinas earn 49 cents.
A modern compensation management platform can analyze pay equity — including salary, bonus, and stock — to help you identify and address pay disparities. Some solutions also enable a continuous pay equity discipline to help you make fair pay decisions for job offers, compensation review cycles, and off-cycle raises.
Compensation is the top cause of turnover
Low pay was the top reason American workers quit their job last year and 78% of employed job seekers think they can make more money by switching jobs this year. This appears to be paying off, as 29% of those who left their organization during the pandemic received a 30% increase in compensation and 20% now make 10-20% more.
Further, pay transparency and compensation discussions among colleagues may bring unfair pay practices to light. Among those who found out they were earning less than coworkers with the same experience or title, 59 percent looked for a new job within a year.
The quits rate is still near a record-high and turnover costs an estimated one-half to two times an employee’s annual salary. Being more strategic about compensation can help you retain your team and save money in turnover costs. Investing in the right technology can better enable you to do that.
For example, modern compensation platforms help you track key compensation metrics like compa-ratio, pay range penetration, and salary band adherence. These can guide strategic adjustments so you can bring employee pay in line with your compensation strategy. A platform like Compaas will also provide visibility into when employees last received a raise, bonus, or equity grant so you can offer those as appropriate.
Distributed teams can add more complexity to compensation
Remote work is more common than ever and your team may be distributed across geographies with a wide variation in cost of market. This is fairly straightforward if you use a global pay rate and more complex if you use a localized remote pay strategy.
Compensation management software helps you normalize pay data so you can ensure fair compensation regardless of where your team members are located. For example, it can help you understand why a top performer in Peoria earns less than an average performing colleague in San Francisco.
It can also help you identify when an employee has been red-circled after relocating to an area with a lower cost of market. This provides more visibility around why some team members may not be receiving a seemingly well-deserved raise.
The internal customer experience matters
Compensation review cycles can be stressful and time-consuming for your stakeholders — just as they can be for your compensation and total rewards team. The right technology can enable better collaboration, efficiency, and satisfaction.
For example, your solution should provide managers with the right data to make informed merit-based raise recommendations. It should also produce total rewards statements to help managers communicate about compensation changes with their team members.
Think through the stakeholder experience and bring these internal customers in during compensation platform evaluations to ensure their needs are being met. This can make the process a lot easier for all involved.
Final thoughts on evaluating compensation and rewards platforms
There’s so much change affecting the compensation function and it may be time to revisit your tech stack and evaluate new platforms to better support your team. Take stock of what matters most to you and your stakeholders so you can find the solution that will help you reach your strategic goals.
Want to learn more about updating your HR tech stack?
Watch our webinar, What to Consider When Evaluating Compensation & Rewards Platforms.