With labor shortages in several sectors and a faltering economy, compensation management is currently one of the major human resources challenges.
So, what are the major trends in compensation management?
Flexible overall compensation
The expectations in terms of working conditions and recognition differ from one generation to another. For example, younger people tend to value enriching experiences, professional development and personal fulfillment more than direct remuneration. Offering employees flexible work arrangements such as variable pay programs, personalized benefits or flexible/hybrid work schedules helps meet the expectations of different generations. Practices fostering a personal/professional life balance improve the well-being of employees, which increases their job satisfaction, which, in turn, contributes to their retention.
Transparent compensation practices
Marked by the adoption of salary transparency laws in several provinces, transparency is a trend that stems from the growing necessity for employees to know their salary growth potential within the company they work for, to ensure that they are compensated fairly in comparison with colleagues in similar functions and to ensure their overall compensation is competitive with the market.
British Columbia, Prince Edward Island and Newfoundland have already passed laws to disclose salary ranges when posting jobs, which also prohibit asking candidates about their current and past salaries and prohibit penalizing employees for disclosing their salaries. Ontario has similar legislation under consideration.
In the spirit of more transparent communications, more and more companies are more clearly defining their internal compensation practices, performance evaluation criteria and advancement opportunities. A compensation transparency policy may include, among other things, the disclosure of salary policies and salary scales applicable to different positions in the organization. Transparency in compensation practices helps strengthen employees’ sense of fairness, trust and commitment to the company they work for.
Fair compensation practices
In Canada, diversity, equity and inclusion (DEI) initiatives have a significant impact on fairness in compensation practices within companies. These initiatives involve, among other things, identifying and addressing biases in hiring, evaluation and promotion practices. On the compensation side, they help establish objective, clear and non-discriminatory compensation criteria.
In Quebec, a pay equity analysis is mandatory every five years for companies with 10 or more employees. Canada has adopted a similar law for businesses under federal jurisdiction.
DEI programs have enabled companies to increasingly prioritize pay equity by eliminating unjustified pay gaps between genders and minority groups. Well-defined and fair compensation policies not only comply with the law, but also facilitate the attraction and retention of employees.
Well-being programs at work
Concerns about mental health in the workplace have intensified in recent years. Now, many workers expect their employers to offer wellness and employee assistance programs. These programs are designed to support employees’ overall health, both physical and mental.
Thus, a growing number of small/medium-size companies are following in the footsteps of large companies by offering their employees resources and tools to manage the personal and professional challenges they may face.
It has been shown that workplace health and wellness programs can effectively help improve engagement, which can translate into better job performance and reduced absenteeism.
Stand out in compensation
With increased competition to attract and retain talent, companies are implementing competitive compensation policies to retain their employees.
Companies must not only implement competitive, flexible, fair, transparent compensation policies that promote employee well-being, but they must also stand out. For example, they can implement market-related scales, annual or bi-annual salary reviews, generous and personalized recognition programs, or “tailor-made” working conditions.
Whatever options you choose, the key is to continually adapt to your employees.
To face current labor challenges, small/medium-size companies will have to significantly review their compensation practices. The trends reflect a shift towards more transparent, equitable and adaptive practices to reduce workforce volatility and meet the specific needs of new generations.
