As hiring markets become more competitive, your compensation strategies must adapt. To succeed in candidate-driven markets, you'll have to beat your competitors in attracting and retaining top talent. This is particularly true in the post-COVID-19 era of remote work.
Several organisations are taking a less competitive approach to compensation as they wait for the labour market to cool, according to Tony Guadagni, senior principal in the Gartner Human Resources practice. “These organisations will be at a significant disadvantage if demand continues to grow as expected - especially as other employers offer higher base pay salaries,” Tony added.
The most difficult task for businesses is to create competitive remuneration packages while being profitable. To attain this balance, they must carefully examine their own business performance, compare it to average pay in your market and make sensible decisions.
Here are four compensation strategies that can help you attract and retain employees in today’s new talent landscape, recommended by Gartner.
Increase compensation and benefits
Employers have always used increased base compensation and perks to recruit and retain talent. While this method provides a rapid return on investment for positions that require urgent attention, it is also exceedingly costly and impermanent. Organisations planning to compete on compensation must be open to alternatives, such as variable pay tactics. Signing bonuses offer an opportunity for employers to incentivise candidates more quickly and address immediate talent gaps. Providing lucrative benefits, such as tuition reimbursement or retention bonuses, can establish a lasting differentiator in the market and signal a long-term commitment to employees.
Pay with time
Paying employees with time is quickly becoming a more common tactic among employers who can’t, or don’t want to, compete on compensation alone. Organisations can differentiate themselves by providing employees with work schedules that offer greater work-life balance. One approach is to guarantee a maximum workload of hours for a task or role. Employers can also embrace radical flexibility, giving employees control over where, when, and how much they work. Another alternative is to adjust compensation for hours worked – such as 80% of work for 80% of pay – with full benefits. This can provide long-term advantages and prompt manager creativity in job design.
Invest in internal mobility
Employees’ focus on career progression and development may be deprioritised due to attractive pay offers. To remain competitive, employers must reinvigorate those needs by increasing investments in their internal labour market.
“HR leaders must accelerate internal promotions and backfill lower-level vacancies from the external labour market,” said Guadagni. “Adopting an organisational preference for internal mobility supports retention of key talent and reduces the time to fill for critical roles – lowering stressors for the rest of the organisation.”
Widen talent pools
The pandemic has shifted many employees’ perceptions of their work and their workplace. To help fill critical positions, HR leaders can consider candidates from unconventional backgrounds that are seeking new career paths. Organisations should reevaluate qualified talent and predictors of long-term success, including skills adjacencies, reducing or eliminating education requirements or location requirements.