In today’s competitive workforce environment, a good compensation and benefits package goes far beyond what appears on someone’s payslip. In addition to a competitive salary, people make employment decisions based on benefits that meet their individual needs, a flexible company culture that allows for remote or hybrid work, and even opportunities for career advancement.
These elements all go into crafting a strong compensation and benefits strategy. Beyond creating an attractive offer to new job candidates, organizations need to have this crucial strategy in place to retain their top people, maintain equitable compensation across teams, and provide transparency about when and how people can access certain benefits.
A panel of industry experts discussed the challenges and merits of building effective compensation strategies—and shared the top questions that HR and leadership teams should consider—in the webinar “Creating a well-balanced compensation and benefits strategy.”
- David Duckworth, co-founder and COO at global benefits platform company, Ben
- Sophie Matthews, people manager at cloud-based payroll software company, Payfit
- Patrick Maier, former general manager at compensation benchmarking company, Payspective
Here are some of the key takeaways from their conversation.
How to figure out what to pay people—and why it’s so hard
One of the most challenging questions companies face when figuring out a compensation structure is also one of the most fundamental.
“The most basic challenge that a lot of the companies that we’re working with have is that it’s simply really, really hard to determine what the right package is for any given role,” Patrick says.
The lack of comparable benchmarks can be a significant obstacle.
“Smaller businesses don’t have the luxury to have access to these huge metrics on compensation,” Sophie says.
Sites like Glassdoor can offer some insights, but their numbers often skew towards larger enterprises. Similarly, they don’t consider the different pay structures—like bonuses or stock options—that smaller or startup businesses might use.
Once you’ve found reliable benchmarks to work from, you need to develop a strategy around using them.
“Have a strategy for where you want to be,” David says. “Do you want to be super competitive and always pay over the top? Do you want to be paying above market or below market? What’s the strategy around the type of talent that you’re trying to attract?”
For example, if your company focuses heavily on design and you need to attract the top 10 percent of designers in the country, you can expect to pay well over the median salary range, perhaps closer to the 90th percentile. On the other hand, if your business model requires a less specialized skill set, you may be able to find the people you need by offering median pay or even a little less.
Likewise, you may want to incentivize a team of high-performing young salespeople with equity or stock options based on performance while simultaneously optimizing the base salaries of more experienced team members in other functions.
As you make these decisions, be sure to keep an eye on their effect on equitable compensation.
“You may have very rigid salary bands, and you may be quite confident that you’re not discriminating on pay when it comes to men versus women,” Patrick says. “But you could still have a huge gender pay gap because all your C-level is male or because all of your engineering roles are dominated by men.”
Identify an objective for your benefits package
Beyond salary, there are several questions to consider when deciding what benefits will round out your compensation package.
David says he sees companies fall into one of three categories:
- Statutory: Organizations that provide only what is required by law or benefits that offer them a tax advantage, nothing more.
- Market competitive: Organizations that choose benefits that are relevant within their particular geography, such as offering a choice of health insurance plans to United States-based teams.
- Over-the-top: Organizations that want to be known as an employer of choice and use benefits as a tool to create that perception. Big names in tech (Facebook, Google) fall into this category.
“The important thing, as ever with any of these kinds of questions, is defining what the objective is,” he says. “Why are you offering the things that you’re offering?”
Align benefits packages across global sites
At PayFit, Sophie and her team answered this question by aligning on a few benefit themes to offer people employed across five countries, even if the deliverables vary slightly across geographies. For example, each office provides some sort of benefit to cover travel expenses to work and another to encourage health and wellbeing. The organization ties anniversary rewards to another company value.
“We are currently rewarding one-year and three-year anniversaries,” Sophie says, “and the benefit in relation to that is to really encourage people to try something new, whether that’s visiting a new place or trying a new experience—like a sports activity or a dining experience—something that pushes them out of their comfort zone.”
Targeting your benefits to your people is one way to use your benefits budget efficiently, Patrick says. If people aren’t using what’s available, it’s time to find out what they want and focus on offering that rather than a wide (and expensive) variety.
“A smaller budget can go a really long way when you spend it right,” he says.
Consider non-monetary benefits in your calculations
Some benefits are hard to put a monetary value on—but they might be the ones worth the most to your people. That’s where company culture plays a role.
“When you join a business, very early on, you learn—are you trusted as an employee?” Sophie says, talking about how a company treats brief absences for things like dentist or doctor appointments. “Businesses where they trust their employees to do that and not have to take your leave … I think they are very much appreciated by teams to not have to make formal processes around those kinds of small things.”
David says that whether or not companies write these practices into policies, they are a part of the system of which leaders should be conscious.
“How does your compensation and benefits system help to either reinforce or create the kind of culture that you want?” he asks.
Cut the cost of benefits with flexible work policies
Remote and hybrid work policies are another benefit more people expect from companies today.
“We’ve heard from a few companies that have had quite financially attractive offers rejected because they wanted them to come into the office,” Patrick says. “I think [remote working] is a really important complement and something to keep in mind.”
In a smaller business or startup, communicating the value of non-monetary benefits can help attract top talent, even if you aren’t yet able to offer as much in terms of salary.
“If you’re joining a really small business, your potential for career progression … could also be really important for you,” Sophie says. “If you can only budget-wise afford on the lower quartile, then look at what your alternative selling point is.”
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Make it official: Craft a clear and transparent policy
Whatever you decide to offer in terms of pay and benefits—whether the bare necessities or all the bells and whistles—formalize the details into a compensation policy that your company can follow, communicate, and manage across the organization.
Instituting formal processes too late—or failing to communicate them—can lead to unintentional inequality in the pay structure.
“Early-stage companies often just give pay raises to the people who ask for them and just assume the ones who don’t are happy with what they are getting,” Patrick says. “That’s quite dangerous because statistically, men are much more likely to proactively ask for a raise than women. And when you just do it on the basis of what you feel is right, you might not actually be treating your whole organization the same and fairly.”
“So having those processes in place,” Patrick continues, “and having a policy in place where you can be sure that you’re treating everyone equally—and also something that people can refer back to and say, hey, this is in the policy—it’s really important.”
Being transparent about your compensation policy doesn’t mean sharing everyone’s salaries. Nevertheless, it’s important for everyone in your organization to know that there is a policy in place. This helps people understand what goes into compensation decisions, how they can access new benefits, or when they are eligible for pay raises.
“It’s great if you have an amazing policy in place that takes into account all sorts of different situations and employees,” Patrick says, “but when people don’t understand what the policy is, and when there’s no transparency in the organization, then there might still be frustrations. There might still be a perception of unfairness.”
In relaying policy, HR leaders must take the lead
In addition to the processes, HR leaders can play an essential role in communicating the full value of what the organization offers its people.
“You would be surprised how far just being great at communicating what your policy is will get you—and what’s the total value to a potential employee,” David says, “because all these things get buried under somewhere, and they might not understand that.”
The conversation around compensation and benefits involves a lot of tough questions that leaders will need to answer, but the reward is a competitive and equitable strategy that will guide your organization for years to come.
“Compensation is a really vast topic,” Sophie says. “And being such an important topic, I think it’s important that you try to get it right the first time and take your time in doing that.”This article is based on the panel discussion “Creating a well-balanced compensation and benefits strategy.” Watch the full webinar to learn more about crafting an equitable, manageable, and attractive strategy for new hires and current team members.
From Shelby Blitz
Shelby is the Head of Content at HiBob. She's passionate about the written word and storytelling. In a past life, she was a music journalist. When she's not writing and editing you can find her baking sweet treats in the kitchen.