The pandemic has altered the modern workplace and turned work-life balance upside down. All these changes, in such a short time, have forced many organizations to rethink how they operate.
Continuity business models and strategies have required leadership to openly communicate with their employees about the impact of these changes. One of the areas that may face intense scrutiny is compensation management.
COVID-19’s Impact on Compensation
Most compensation managers and analysts will start each fiscal year with a companywide compensation review, as part of annual headcount planning and budgeting efforts. This process gives a baseline of where to start. Depending on how quickly employment conditions are changing in your local job market or industry, reviewing pay structures and benchmarking may need to be done more frequently than once a year or every two years.
Here are three considerations when evaluating changes to your organization’s compensation structure.
Recruit and Retain Top Talent
Talent acquisition professionals, whether internal recruiters or a third-party recruitment agency, need a firm grasp of what the employer is willing to pay and what candidates expect. Certain skillsets have seen a recent rise in demand, especially for roles in professional and business services, tech, and segments of transportation and warehousing. The more in-demand the role and the harder to fill, the more important pay will be for a candidate to accept a job offer.
Before posting a role, ensure salaries are validated and based on current market conditions. If you haven’t hired for this role in years or the required skills have changed, then your old pay range may not be competitive enough to lure passive candidates away from their current employers. If the role is new to your organization, it presents a perfect time to research the market value for the job title and skills to ensure your compensation package is realistic. In addition to the initial offer, it's equally as important to leverage the right tool to forecast wages over the next few years to gauge future impact on budgets for overtime, merit raises, bonuses and departmental headcount budgets.
Compensation concerns for talent acquisition initiatives:
- Ensure set wages are competitive for your local job market and industry.
- Provide recruiters and talent acquisition professionals with valid salary data for each role.
- Determine how new hires’ wages will impact the overall budget for overtime, merit raises, bonuses, etc.
This information gives recruiters and talent acquisition teams confidence in negotiating compensation with candidates, especially for roles where talent supply is lower than demand. Salary forecasting will also help hiring managers balance adding team members with the need to ensure compensation for current employees remains competitive and can allow for merit raises, bonuses and other pay-for-performance incentives.
Provide a Realistic Compensation Forecast
Attracting and keeping enough talent to meet changing consumer demands remains important. Even businesses that have had to furlough employees or shorten hours will need to budget for when consumer demand increases and returns to pre-pandemic levels. LaborIQ® by ThinkWhy predicts a significant pickup in the pace of the recovery of jobs and productivity in the second half of 2021.
During this pandemic, employees have been faced with additional stressors that have led to a mental health crisis in the workplace. Some are worried about their job security and career path, while others are burned out from isolation and lack of childcare options during work hours. Regardless of the cause, compensation managers must equip management with the tools to address these concerns.
An informed management team can prevent a mass exodus of employees leaving for other opportunities that appear more secure. They can also shore up employee morale and build a sense of community as employees continue to deal with pandemic-caused concerns that may affect their work performance.
Remain Strategic and Flexible
Clear communication and staying aware of changes in the job market are the keys to keeping your organization’s compensation structure current. Whether it’s talent acquisition or employee retention, being able to think strategically about your compensation planning will make it easier for your organization to adapt to the evolving economic climate.
LaborIQ by ThinkWhy reports, forecasts and advises on employment conditions and the impact to jobs, industries and businesses across all U.S. cities.