In a world where 'show me the money' has been replaced by 'show me the meaning,' how are businesses responding? The past year has seen seismic shifts in the international compensation landscape. From the rise of remote work to the demand for pay transparency, 2023 marks a departure from the traditional compensation strategies of the past. It's no longer just about the pay and benefit. Employee expectations are transforming, and HR professionals worldwide are adapting to meet these evolving needs.
If you’re an employer or a business owner, it’s totally understandable to want to be in the loop about these game-changing compensation trends and strategies. After all, understanding how to attract, reward, and retain top talent in a post-pandemic world will help your company catch up with the growing demands of the modern workforce to achieve collective success.
Top 5 Trends in International Compensation
In the wake of the COVID pandemic and the widespread labor movement known as the Great Resignation in 2022, employers worldwide are facing new challenges and opportunities in their compensation philosophy. This era, defined by a shifting landscape of worker priorities and expectations, requires a fresh look at how businesses structure and communicate their remuneration packages. Some of the major shifts we're seeing in this post-pandemic era include:
1. Competitive Pay Amid High Inflation
In the face of inflation, generous compensation has become a non-negotiable for many employees. Companies are compelled to offer incentives that not only attract top-tier skills but also keep pace with rising costs of living. HR staff are using comprehensive salary data to make informed compensation adjustments that address inflation's impact on the real value of wages. Additionally, the median raise in salary range is projected at 3% this year, a reflection of businesses responding to these economic shifts.
2. Labor Shortages and Salary Increase
The Great Resignation has amplified workforce shortages in many industries, most noticeably in the tech industry. These shortages are pushing organizations to offer more than just a generous salary. Businesses are realizing the need for better pay and stronger benefits to both retain talent and appeal to potential employees. HR leaders are turning to industry and role-specific pay data to shape their compensation strategy and meet worker expectations.
3. Adapting to the Remote Work Trend
The pandemic-induced rise of remote working setups has dramatically altered compensation strategies. Many employers now need to consider the cost of living and generous payment in different geographic locations. This has led to an evolution in the compensation philosophy of many organizations, with some choosing to 'level up' salaries based on high-cost locations, while others tailor their pay scales to the specific location of each remote staff.
4. Re-Introduction of Pay Equity
With the spotlight on social justice issues, pay equity is no longer a 'nice to have'—it's a 'must-have’ for many industries. More employers are reassessing their pay structures to ensure equal pay for equal work. By analyzing remuneration data and adjusting their compensation strategies, companies and organizations aim to eliminate the wage gap. Transparent communication about these initiatives is key, as employers educate employees about their commitment to fair remuneration.
5. Meeting Employee Expectations
Today's employees are looking for more than just a paycheck. They want a holistic compensation package that includes a fair incentive, a strong benefits package, and non-tangible rewards like work-life balance and meaningful work culture. Employers that have recognized this shift are adopting more flexible, comprehensive, and transparent remuneration approaches that align with these evolving expectations.
Navigating these new realities requires companies to adopt a dynamic approach, constantly revising and refining their compensation structures to stay relevant in the labor market. Employers need to understand that employees now expect more—they want their work to offer not just a livelihood, but a life. As we continue through 2023, these trends will undoubtedly continue to shape the way businesses think about and implement their remuneration techniques.
The Rise of Remote Working Setup
The huge jump to remote working arrangements triggered by the pandemic has had profound implications on global remuneration trends. As businesses transitioned into remote or hybrid models, the concept of geography-based pay has come under scrutiny. This change has not only altered remuneration structures but also reshaped worker expectations:
Most employers are wrestling with the challenge of how to compensate remote workers. Should the salary range be based on the company's location, the employee's location, or a national average? Some companies, especially in the tech sector, opt for a location-agnostic approach, offering competitive pay rates that attract top talent irrespective of their residence.
The Cola War (That’s Not About Drinks)
The Cost-of-Living Adjustment (COLA) is increasingly being utilized by companies offering remote work opportunities. Here, the salary range is determined by analyzing the cost of living and average incentives in the employee's geographic location. This method may result in significant remuneration adjustments, ensuring that employees in high-cost areas aren't disadvantaged.
Other relevant concerns emphasized in the remote working setup include:
Addressing Pay Equity
Remote-based work has brought the issue of pay equity to the forefront. HR professionals need to ensure that employees performing similar roles are paid fairly, regardless of their location. This focus on fairness requires pay transparency about salary information and compensation philosophy, a trend that's gaining traction among businesses seeking to foster trust and retain workers.
Incentives for Remote Workers
In addition to monetary incentive considerations, businesses are exploring unique benefits and bonuses for remote staff. These may include allowances for home office setup, coverage for internet and utility costs, or even co-working space memberships. Companies are realizing that such non-cash incentives can significantly enhance their remuneration package's overall value and appeal.
International Compensation Challenges
For businesses employing overseas remote workers, navigating different countries' wage laws and standards can be complex. It's important for these companies to have a robust remuneration program that balances compliance with local regulations and generous remuneration to attract and retain international talent.
The rise of remote working setup is reshaping the traditional notions of the workplace and, in turn, redefining employee compensation. Businesses and HR leaders must continuously adapt and innovate their remuneration approaches to meet these evolving demands. As remote working arrangement becomes increasingly popular, the need for fair, transparent, and generous remuneration will continue to be a priority for companies worldwide.
Increased Focus on Pay Equity
The issue of equitable pay has taken center stage in recent years, demanding urgent attention from employers worldwide. Achieving fairness—equal pay for equal work—has become a critical element of comprehensive and fair remuneration approaches. But what does this increased focus on pay equity look like in practice?
Transparent Compensation Philosophy
Transparency is paramount when it comes to addressing equitable remuneration. Most employers are providing clear pay information to employees and prospective employees alike, outlining their salary range for specific roles and explaining how remuneration is determined. This level of pay transparency can help organizations demonstrate their commitment to equitable remuneration and build trust with their workforce.
Regular Pay Audit
HR managers are increasingly conducting regular pay audits to assess their organization's equitable pay structure. By analyzing salary data, they can identify and rectify any wage disparities within their workforce. This proactive approach ensures the continuous alignment of remuneration policy with equitable pay goals.
Consideration of Total Compensation
Fair remuneration extends beyond base incentives. Among the factors include the entire spectrum of employee compensation, from bonuses to benefits. Most employers are considering this broader definition of pay to ensure equal opportunities for all workers such as equity-based compensation in the form of stock options and RSUs, which give ownership stake. A comprehensive review of all aspects of remuneration is crucial for achieving truly equitable pay.
Education and Training
Some employers are choosing to educate employees about their compensation philosophy and the steps taken to ensure fairness in remuneration. This open communication is not only about pay transparency but also about creating awareness around the value of total compensation, enabling employees to fully understand and appreciate their remuneration packages.
The Role of Legislation
In many countries, fair remuneration is not just a moral imperative but a legal requirement. Compliance with local, national, and even international laws regarding equal pay is a vital part of a company's remuneration policy. Keeping abreast of changes in legislation and proactively adjusting incentive practices can help employers stay compliant and foster a fair workplace culture.
Pay equity is no longer an option—it's a necessity for businesses seeking to attract and retain top-tier skills, boost employee satisfaction, and uphold their reputation as fair and ethical employers. This way, businesses can foster a more inclusive and equitable work environment, ultimately leading to improved productivity and employee retention.
Work-Life Balance and Company-Worker Alignment
In recent years, workers have prioritized work-life balance more than ever. Recognizing this trend, employers are offering incentives that cater to these needs. Many organizations, for example, have introduced flexible working hours, mental health support, and other non-cash incentives. These factors not only reward employees but also align the company’s values with those of the workers.
Moreover, more employers are incorporating variable pay into their remuneration program, linking specific goals to bonuses and other benefits. This approach provides employees with a more direct line of sight into how their efforts contribute to the company's success.
Non-Cash Compensation Strategies
Non-cash benefits are increasingly popular. More than just a trend, these benefits are becoming a necessary component of generous total compensation packages. These can include health insurance, retirement contributions, wellness programs, and professional development opportunities.
According to recent surveys, many employers plan to increase their investment in non-cash benefits over the next year. The reasoning is simple: aspiring employees value these benefits and employers recognize their power for attracting and retention of top talent.
Other Compensation Trends in 2023
In 2023, some other noteworthy remuneration trends include the rise of the tech industry, where high inflation and labor shortages have led to significant salary increases. HR supervisors are also expecting to see an increased use of job postings that include pay information upfront, to attract prospective employees.
Most employers are also starting to incorporate measures of employee satisfaction into their compensation philosophy. This trend towards greater salary transparency in the hiring process is expected to continue, as employers recognize the power of information to attract and retain top performers.
Similarly, with the aim of driving performance and retaining top talent in the market, some employers are considering variable pay as a significant part of their remuneration technique. For example, variable pay, also known as a performance-based incentive, includes bonuses, incentives, and other forms of reward that are tied directly to an employee's performance, productivity, or company results.
HR managers are finding that variable pay can motivate employees to meet and exceed their specific goals, thus fostering a high-performance culture. By using this scheme, employers can make the remuneration structure more flexible and adaptive to business conditions. Employees, on the other hand, gain the opportunity to influence their total earnings, which can increase job satisfaction and commitment.
Reasons to Provide Meaningful Compensation for Employees
Compensation is more than just a salary. It's an employer's way of communicating concern and respect to their employees. A strong compensation policy can help attract and retain top talent, enhance collaboration, and improve job satisfaction. In overwhelming inflation times, offering competitive monetary incentives and benefits is crucial to keeping employees motivated and engaged.
Furthermore, when employees understand their compensation, they are more likely to feel valued and satisfied with their job. Transparency, fairness, and adaptability are all key elements of a successful compensation program.
Wrapping up this round-up of compensation trends, it’s clear that 2023 is a pivotal year for international compensation trends. The shifts brought on by the pandemic, the Great Resignation, and the rise of remote working arrangements have led to a significant evolution in compensation techniques. Business leaders and HR managers must stay ahead of these trends to ensure their organizations remain relevant in the talent acquisition market.
Understanding and responding to these trends is crucial for any company looking to thrive in this ever-changing landscape. Just as we do at Upwork. If you’re curious as to how our RSU plans are changing the playing field, one company at a time, book a demo with us here.