As human capital grows scarce, flexible compensation can help attract and retain talent

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NS great resignation One of the most important events in recent American history. We are seeing that the post-COVID-19 generation is refusing to work in the same conditions as they did earlier. America is facing the most major labor shortage decades, and it is more difficult than ever to fill positions that require high-demand skills.

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Medium-sized companies are finding it particularly difficult to retain qualified personnel. Faced with significant resource constraints, small budgets, and labor demand for flexible solutions, problems for SMBs are as large or even more significant than for larger organizations.

One way to make your company attractive is to develop an attractive compensation strategy and increase pay transparency and equity. Employees don’t always leave or stop because of their pay, but an opaque model for the allocation of compensation increases feelings of disconnection and reduces engagement.


Let’s look at how startups can benefit from compensation analysis, and how they can use available data to develop a comprehensive compensation strategy.

Understanding the Complexity of Compensation

Wage equity is one of the most pressing social issues today, and any discrepancy can have an adverse effect on reputation and company relations.

The amount that comes to an employee’s bank account is just a piece of today’s compensation package. Compensation can include basic pay, annual cash bonuses and long-term incentives.

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When mixing the compensation mix together, there are different trade-offs to consider:

  • Fixed vs Variable Compensation: Basic pay compared with bonus.
  • Long Term Incentive vs Short Term Incentive: Short-term incentives can be in the form of annual bonus structures. Long-term incentives are usually stocks or other forms of compensation that have been vested over the years.
  • Cash vs Equity: Equity can include stock options, restricted stock and performance shares.
  • Group Incentive vs Individual Incentive: You can apply percentage-based increments to all positions or give bonuses to select employees.

It is not ideal to have a uniform policy for all posts and departments. Managers should interpret their reward decisions on an individual level, and compensation decisions should reflect each employee’s skills and contributions. In addition, companies are bound to have different budgets (for example, higher revenues during the holiday season) and philosophies to allocate them.

Many people make the mistake of sticking to an approach that doesn’t make for a strategic standpoint or doesn’t motivate the team enough. Instead, managers must gather data, work through various analyzes and scenarios, and design a compensation strategy tailored to the company. This is where compensation management software comes into play.

the devil is in the data

The data will help you understand where the talent market is headed and where your company stands.

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