“The times they are a changin’” --- Bob Dylan, 1964
Hiring talent worldwide is recognized as one of the most important issues facing companies today. No doubt you have read articles about the “war for talent”. It’s not just the U.S. --- it’s worldwide.
What does this mean for total rewards?
The pressure is on for Compensation professionals to do their part in fighting this “war”. Whatever it takes to hire, motivate, engage and retain talent is the marching order. It will be a little more complex now. They will have to deal with legal, generational, cultural and competitive differences in every company location.
Let’s look at a few examples of how total rewards might change:
Annual Salary Increases
The traditional annual merit increase may be history. Base salaries might be kept flat using variable pay as “top up”.
An exception would be that employees with “critical skills” would be paid very generously, not only in base salary but in all forms of cash and non-cash compensation. Employees with these skills are the ones that are so important they could cause major disruption in meeting target revenue/profit. Not to say other employees aren’t important --- they’re just not critical.
Two Tier Salary System
Currently new employees in some manufacturing companies are being hired at lower pay levels than employees already working in the same jobs. The unions approved this during the recession as they felt low paid jobs were better than no jobs. A few professional service firms also have a two-tier system. Law firms in the U.S. have practiced this for years.
If companies move to a two tier system, decisions would have to be made as to when/if the employees in the lower tier would be able to catch up with employees on the higher tier. Would it ever happen? If so, would it be based on length of service, merit or some other criteria?
Competitive Practice
Competitive practice (market pricing) might not be the #1 priority anymore. According to a 2010 survey of Mercer, 72% of CEO’s said the focus in the future would be placed on paying more for critical skills regardless of market data. Does this mark a change in emphasis from market pricing to internal equity?
Target Bonuses
Critical skill and core employees may have different target percentages in the same salary grade.
Example: A critical skill employee that is in grade 6 may have a target percentage of 25% while core employees in that same grade may have a target of 10%, or may not even be eligible at all.
Work-Life:
The workforce worldwide is becoming younger and has different needs and expectations.
Example 1: Generation Y’s feel strongly about community involvement and corporate social responsibility. They could be allowed a certain amount of time off during the workweek to participate in a community project. This is sort of like Google’s practice of allowing technical employees up to 20% of their time to work on their own private projects.
Example 2: Almost all Generation Y’s name foreign assignments as an important goal in their career plan. Short project assignments overseas would be viewed positively and would be good learning experiences.
These changes are only a few of many total reward options that might need to be examined. Flexibility, creativity, use of analytics and alignment to business strategy will be more key than ever in the future.
The "new normal" is here. Are Compensation professionals ready for it?
What do you think?
Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA. Jacque has been a speaker in the U.S., Asia and Europe and is a regular contributor to various HR and talent management publications.
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