Compensation Trends 2021: Transparency Is Key

Organizations must be prepared to adapt to changing attitudes

The pandemic has fundamentally changed the relationship between employer and employee. No one (or nearly no one) had the playbook for these new dynamics, and circumstances forced greater transparency from the employer. Employees expect their employers to sustain this transparency post-pandemic on how we make decisions and why, and in many other ways. One example of where more transparency will be expected this year and beyond: compensation. 

So why is transparent dialogue so critical when it comes to compensation?

The pandemic created an environment where people now work from remote locations. That implies new employment — and therefore earning — opportunities. People can now consider companies that they hadn’t in the past because it would have required a move. But the impact on compensation also changes. Perhaps there’s a reduced need for premiums based on a location’s cost of living. 

In HR, we work hard to evaluate job roles and not people. But people fill these roles, and they have real lives and real needs that flex and change. And so, it creates a brand-new dialogue: Can I work from another city? What does my compensation adjustment look like based on that? Beyond the role itself, is my compensation based purely on location or is there consideration for my seniority and the contributions I’ve made? All of this will make things a bit more complicated, but the key will be transparent dialogue on how compensation gets structured in this new environment. 

In addition to the need for increased transparency, here are some other compensation trends HR professionals should be aware of this year:

For those companies embarking on a new compensation system or framing a new one based on all the change underway, there’s one fundamental to keep in mind: Be clear about what you are trying to achieve – and why – and ensure your messages are plain and simple. Also, make sure that managers receive sufficient training and then are tested on that training. Implementing a new compensation framework can be time-consuming and complex, but the messages and materials should be readily available and understood by everyone. And, when in doubt, over-communicate.
 

When introducing a new compensation framework to employees, we would advise managers to: Be honest and transparent Take the time needed to address questions and concerns Seek clarification if needed Provide full disclosure of facts and information Recognize that change is a process Empathize with employees Share insights and learnings with comp team on an ongoing basis

Employees also want more control over their benefits and there are a lot of different plan designs to address this expectation. As the Covid-19 pandemic continues to impact employees, families, and communities, there will be more emphasis on holistic wellbeing and access to information about health and wellness. It takes a lot of education, and a real commitment from the employer, but that is where the future is headed.

Employees will expect that we pay them a certain amount and they will get the work done in the hours they need to do that. I think that mindset and expectation will only increase. They’ll say “Let me set my own work schedule, my own workplace, my own work pace. And as long as I’m meeting our agreed-upon goals, give me the money.” Again, that two-way dialogue becomes critical about understanding expectations and meeting them.

There are states like California that will lead the way in driving this, forcing pay equities and creating audit requirements that require companies to prove equitable pay. When pay equity just becomes the way of doing business, this kind of oversight may erode over time. But we are not there yet.

A generation ago, employees were the recipients of whatever the employer had to give them in terms of advancement, career development and promotion opportunities. No longer. Employees today feel more confident and comfortable saying “wait a minute, I actually have skills that you need, and you need me more than I need you.” We have an obligation to help our employees develop. And forums for employees to say, “here’s what I think.”

Over time, some roles – such as compensation – will require in-house SMEs who focus exclusively on one area. Others will continue to rely on external consultants. We have found value in both. For example, our outside consultants are able to quickly gather essential external benchmark data. As an individual organization, we don’t have the resources to get thousands of company data points to then create these external benchmarks. And, so, we’re using external to make sure our internal ones align. 

The past year has changed so much about how people work, and what they expect from an employer. Organizations must be prepared to adapt to changing attitudes and respond accordingly to a renewed discourse around compensation.