3.3 min
Welcome to ‘Compensation Insider’ - an initiative by HireSure.ai that helps you navigate the murky waters of total rewards. Our vision is to decode and optimise practices related to compensation philosophy, appraisal planning, compensation & benefits planning, ESOP planning, pay parity, rewards, job structure and so much more.
You’re here because you want to minimise the learning curve of org and compensation planning and ensure you lead people first. Our newsletter aims to provide you with all the arsenal (real-time data and insights) to help you put your people in the driver’s seat, and supercharge your company growth.
From the early days of barter, compensation has been at the core of employment relationships.
I mean why else would you work for another person or enterprise?
The evolution of compensation planning, however, has involved significant transformations, shaping it into the strategic and refined process it embodies today.
According to Shruti Shrivastava Pawar, Senior VP of HR at Citi, compensation planning has evolved using different ratios of Process, Value, and Contribution.
She has also roped in a chronological sequence of the distinct phases of compensation planning:
🔒“Compliance-driven Phase” of the 1990s
This phase was characterised by a focus on payroll management and adherence to statutory compliance, with a limited variable pay concept.
💸“Fundamental Phase” of the 2000s
It signified the introduction of variable pay, the adoption of flexible packages/cafeteria plans, and the transition of HR from a support role to a partner role.
🎯The “Strategic Phase” of 2010
It started with a shift towards skill-based compensation. There was also an additional focus on innovative benefits plans for work-life balance and enhanced productivity.
📊The present “Integrated Phase”
In this phase, formulaic incentive plans, automation, predictive modelling, and analysis became prominent features of compensation planning.
Mike Metzger, President and CEO at PayScale has given his agreement in the words:
“We’re also seeing that ’how’ a company pays is really as important as ‘what’ a company pays its employees.”
This perspective sheds light on the growing recognition that your compensation planning now needs:
⚒️ Structure - Having clear frameworks, guidelines, and processes that ensure consistency and alignment throughout the organisation.
💡 Transparency - Fostering a culture of honesty by providing employees with clear and accessible information about the compensation philosophy, policies, and practices.
⚖️ Fairness - Establishing unbiased methods to determine compensation, considering factors such as skills, experience, performance, and market benchmarks.
And as we go on to challenge the status quo of compensation planning, let’s look at some pro tips that will empower you to build a winning team.
The impact of inflation has rippled through the employment industry, causing a notable shift in spending patterns.
According to a Gartner survey, funding for compensation has taken a prominent position as the second-highest expenditure category, with 57% of CFOs planning to increase compensation-related budgets.
And according to Aaron McEwan, VP, Advisory, Gartner, the situation can’t go on like this:
“Executive leaders must select a compensation strategy that mitigates talent risks while minimizing cost pressures,” said McEwan.
Adding to that is the concept of overpaying new hires that are leading many organisations straight towards:
Internal Friction
While this may seem like an impasse, we are going to let you in on a few hacks that can help hire and retain talent without succumbing to overpaying salaries to your employees:
📊 Establish reasonable salary bands for new hires
🔒 Leverage sign-on & retention bonuses, employee stock options, and home office stipends that do not contribute to widening the pay gap
⏰ Extend flexible work arrangements and generous PTO policies for improved work-life balance
With start-ups being highly susceptible to losing talent, ESOPs are no doubt a critical part of your compensation planning 2.0.
But you cannot harness the full potential of ESOPs if your employees are unaware of how it is a great wealth creation opportunity for them.
Your employees might be plagued with questions like:
How are exercise prices determined?
Is it going to be a fixed or performance-based formula?
What happens to the stock options if an employee resigns or the company gets acquired?
How do the tax implications work around different ESOPs?
And they are going to look up to you to provide the answers!
Here are a few tips on how you can effectively communicate an ESOP strategy:
🎮 Gamify the communication process instead of deploying a boring PDF format
⚖️ Make the benefits and risks Of ESOPs very clear
📊 Keep the employees updated on the financial sufficiency of the company (on factors like valuation and funding)
🤝 Employ the services of ESOP management software for your employees
❓ Conduct frequent Q/A sessions for added comprehension of ESOP planning
Robert Half, Founder of Robert Half International once said “There is something that is much more scarce, something rarer than ability. It is the ability to recognise ability.”
And appraisal planning is all about recognising the ability of your organisation and rewarding them accordingly.
In fact, you’ll be surprised to know that in most organisations about 20% of employees get 80% of the work done (The Pareto Principle).
So, rewarding these gems cannot be a hit-and-miss.
And this is where you need to set up Concrete and Relevant parameters to assess your employee performance.
According to our survey, around 51% of Indian-funded start-ups use a 5-pointer performance rating method to assess their employee’s performance.
Out of these, there are some pointers that have proved to be more popular than the others like:
⚖️ Current Compa-ratio
📈 Market movement of functions
🧑💼 Individual Performance
But one pointer that has really taken the compensation industry by storm is:
🔝 The Potential of an Employee
In fact, our survey states that 4 out of 10 companies claimed to use potential as an important multiplier while planning appraisals of their employees.
As the appraisal season is here, ensure that your appraisal planning is methodical and precise.
Credible industry data is the first step of your compensation/appraisal planning.
Especially in a market this volatile (with phenomena like recession, quiet quitting, and great resignation), you need real-time insights into the fluctuations of the compensation and benefits industry.
And data-driven decision-making enables you to revise your salary bands and rewards (dynamically and accurately) to help you tackle high attrition rates and hiring challenges.
Keeping that in mind, we bring you CompUp by HireSure.ai!
Our platform harnesses the power of real-time data for competitive and fair compensation planning.
Not only, but we keep you updated with the latest trends in the world of total rewards.
In fact, we recently conducted a survey to gather learnings on some pressing questions that HR leaders have:
What are the factors apart from the individual performance that impacts increment differentiation among employees?
What are the factors that affect the increment budget percentage of Indian-funded start-ups?
What is the distribution of increment percentage average across functions?
You can refer to our Funded Startups Salary Increment Survey 2023 to get your curiosity satisfied.
Content Creator
I've come to appreciate the extraordinary impact that carefully crafted words can have. They shape perceptions, drive decisions, and inspire action. It's my aim to turn ideas into compelling narratives.
Revolutionizing Pay Strategies: Don't Miss Our Latest Blogs on Compensation Benchmarking