2022 Compensation Trends: Pay Transparency, Distributed Workforces & Total Rewards

2022 Compensation Trends: Pay Transparency, Distributed Workforces & Total Rewards

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1. The Market is Moving Towards Pay Transparency

Pay transparency has become a hot-button issue as more states introduce legislation requiring employers to disclose salary ranges and promotion opportunities to current or prospective employees.  Many of the CHROs in our community are leading that culture shift. Some have already published salary ranges and benefits information on 

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1. The Market is Moving Towards Pay Transparency

their job postings, while others are taking a more conservative approach or avoiding select geographical hiring markets in the short term while things play out. CHROs agreed that a clear compensation philosophy, with buy-in and support from the leadership team, is essential to communicating pay transparency effectively. They 

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1. The Market is Moving Towards Pay Transparency

also pointed out that whether you choose a soft rollout in certain geographical areas or a full rollout, it’s important to engage your employees in the process, clearly laying out for such employees how their current pay is formulated and the various promotion opportunities they can consider to further their careers.

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2. Merit-based and Geo-differential Raises

CHROs have traditionally relied on industry and competitive benchmarks when developing compensation packages, combining “science and art.”  However, the market is now moving faster than ever, making benchmarking more challenging – flipping the ratio to be much more art than science.

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2. Merit-based and Geo-differential Raises

Merit-based and cost-of-living pay raises have gone up by nearly double across the board this year.  To support retention without over-inflating salary budgets, CHROs have been looking more closely at employee performance ratings to see where they can afford to offer above-market raises. From there, they’re leaving it up to the 

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2. Merit-based and Geo-differential Raises

managers to choose how to distribute those raises.

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3. Higher Salary Demands From New Hires

A good part of the conversation focused on the challenges of hiring in a candidate’s market. Even with competitive compensation packages, CHROs are encountering more aggressive salary negotiations from job candidates.  In response, many are offering larger equity offerings and sign-on bonuses if they can’t meet their salary requirements.

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3. Higher Salary Demands From New Hires

Several CHROs noted that during these negotiations, it’s essential to establish firm cutoffs for when a candidate’s demands are too high; and be willing to walk away when it’s not a fit for all of the factors that the company needs to consider.

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4. Revisiting Total Rewards

As compensation becomes a more vital lever for both recruitment and retention, CHROs are taking a closer look at their total rewards package, realizing that a one-size-fits-all approach won’t fully communicate the value of the compensation package.  Many CHROs are structuring different total rewards based on the stage of growth the 

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4. Revisiting Total Rewards

company is at, the level of seniority, and the types of equity that can offer the most upside to an employee. Another hot topic of debate was the subject of bonuses and whether they are still an effective means of incentivizing performance. Several CHROs noted that bonuses could have diminishing returns for top performers, who might 

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4. Revisiting Total Rewards

otherwise prefer an increase to their base salary.  Of course, eliminating bonuses or creating a stretch goal structure can quickly alter the dynamics of not only your compensation strategy but overall financial performance, which is why it should be a conversation between the CHRO and CFO.

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