There has been a lot of discussion, online as well as offline, related to perks and pay – whether it should be kept the same or is a much-needed revision due any time now. “Right” is a subjective term where the meaning depends on the context in which it is placed. What was “right” before the pandemic might not necessarily be right after so many fundamentals of working have changed ever since. Employees, on the other hand, have been extremely flexible in adapting to the new normal, with some liking it more than others. For example, remote working for working mothers who might have toddlers at home to care for, came like a blessing in disguise. It made their work-life balance perfect. Whereas some traveling salesmen, who might’ve been used to performing at their peak while sitting with their clients in-person across a table, might not have liked the remote working situation very much. What may seem right to one employee may not seem right to the other, which is why, today, we will be looking at various aspects of compensation and benefits – why it matters, should it be changed, and what happens if we change or don’t change the current system.
Let us first start by differentiating between compensation and benefits. Compensation is everything that is given to an employee in exchange for their work. Benefits are a part of compensation and are strictly non-financial in nature, while compensation can be both financial and non-financial. Compensation is generally used to attract top talent from the market into the company, while benefits are generally used to motivate existing employees in the company. Compensation is a direct form of payment that is taxable, while benefits are more indirect in nature which can be fully tax-exempted. These are important differentiations to keep in mind if you are an employer or a business owner, especially a new one.
CHANGE IN THOUGHT
Every industry has seen significant growth in the past decade. Naturally, this has an effect on employees. Continuous positive growth automatically attracts top talent and, with it, high expectations. According to a recent SHRM Online survey, 88% of all current employees reported being fairly satisfied with their jobs – a record high since 2006. When asked further about their reasons for job satisfaction, most of them reported these three reasons to be the main drivers of their positive experience:
- Respectful treatment of all employees
Humans are the single most important asset of any company. It doesn’t matter how much automation a company has implemented, nor does it matter how much it will implement in the future. If the humans are not cared for, everything else crumbles with time. Employees will always be the final deterministic cause of any company’s success or failure.
Flexibility was an important factor that was tested during the pandemic. People started working remotely, which improved their work-life balance while keeping their productivity constant. In some cases, people found themselves pushing their productivity beyond what was previously possible. People could easily switch between work and chores without hampering efficiency. Since this was never tested at such a massive scale before the pandemic, employers tended to shy away from remote working ideologies in fear of it affecting productivity. However, since the pandemic, employers have become more welcoming of remote work, and if you scout recent job postings, employers have even started offering remote work as a perk – making it an inclusive part of the overall compensation and benefits strategy of most organizations. Other perks such as improved health insurance, food/shopping vouchers, flexible work schedules, free access to professional development platforms, mind and body fitness subsidies, unlimited vacation, etc., have started making way into the overall payout package of employees across all industries. After all, attracting top talent and retaining them over several years is one of the primary objectives of organizations across the world. Offering such perks gives more credibility to the employer, improves reputation in the market, and most importantly, makes potential hires choose you instead of your competition.
Like benefits, when it comes to compensation, employers must be aware of what they are offering versus what the market is offering for a particular job role. It is imperative to offer competitive pay for every job role that you must pay. One of the more common mistakes that you may notice employers make is offering good perks but below-average pay. Such a strategy may push employees to accept your offer, but then it becomes a challenge to keep employees motivated in the long run, causing them to lose motivation and start looking for newer opportunities in the market. A recent tweet by Naval Ravikant, an Indian-American entrepreneur and investor, read, “Pay double and insist on ten times the quality,” to which Ankur Warikoo, an Indian entrepreneur, replied, “Works best for trust. Do double (without being asked to). Earn ten times the trust”.
Some of the best business owners and managers understand the importance of showing value to employees in the form of direct monetary benefits. It is one of the easiest methods to improve trust, productivity, and efficiency. Companies like Google, Microsoft, Netflix understand this very well, which is why they don’t hesitate to pay their best employees 5 to 6 times more than the average market rate. These employees, in turn, perform at their highest level, making the company grow at ludicrous rates. That being said, it is fairly evident that not every business in the industry will have the financial liberty to 5x their employee pay overnight, but the best part is that it doesn’t have to be that high. This Caribbean food chain in Florida, USA, managed to end labor shortage for their business by making small changes directed towards their employees. The US restaurant industry currently faces an acute labor shortage after lockdowns were lifted a few months ago. This food chain managed to fight the shortage effortlessly by making these small changes in their compensation and benefits packages:
- Higher wages for staff
- Weekend-working bonus
- Bigger sign-on bonus
- Bigger referral bonus
- Childcare leave
- Free education programs
- Cheaper medical plans
This change in thought across multiple industries has allowed businesses to thrive in challenging environments such as the one we currently live in – the post-pandemic world. On the contrary, the general workforce, especially the Gen-Z workforce that is entering fresh in the market, is entering with a lot of expectations that have to be met by employers because if not, this new workforce is ready to hop from one job to another until they are comfortable. This is the reality today.
Imagine an employee receiving two job offers offering the same pay, but one of them is offering way more benefits than the other. Which one will he/she choose?
Exela HR Solutions is a world leader in providing end-to-end HR solutions to businesses of all sizes worldwide. Get in touch with us today to learn more about our payroll and compensation and benefits offerings.