Navigating the Compensation Landscape—Trends and Strategies for 2024

Katrina Faessel:
Are you currently able to compete for today's top talent? Do you know the latest trends shaping compensation practices? We're happy to welcome Kristin Russum, Director, Org Development with TriNet, and Carol Ferrari, Vice President, Product Marketing with Salary. com, who will help you explore effective strategies for today's business environment.

Kristin Russum:
Welcome to Navigating the Compensation Landscape, Trends and Strategies for 2024.

There are always so many conversations, opinions, webinars and blogs out there about the latest trends and fads that are going on in the workplace, and even that with compensation. When we started putting together this webinar, we had the idea that we would be discussing those trends that would be impacting compensation decisions in 2024 and beyond, but really what it didn't take us too long to discover is that any trend that we were seeing kept coming back to transparency.

What we now know is that transparency is not a fad. It's not a trend. It's here to stay and it's expanding. We realized we need to help set our clients up to meet the employee and the statutory demands for transparency. Transparency, candidly, is the most relevant conversation we could have today.

So on a daily basis we hear: what do I have to do? What should I do? What will this mean for my organization? What is transparency? We're regularly speaking with leaders who feel uncomfortable and unprepared to begin having what can sometimes be a difficult or even emotional conversation. Today we're going to discuss the what and why of compensation transparency and we'll review the three areas you need to consider and to know to support transparency. And we'll be providing you some actions and resources to further transparency within your organization.

Going back to that last question that I mentioned, what is transparency? We know that when some employers hear this term, they may automatically go to the notion of disclosing every detail of pay information to all employees, but there are actually many ways to look at transparency. Being transparent in compensation may mean disclosing all pay regions for all roles.

Certainly an option or perhaps disclosing ranges specific to a team. The first step in figuring out what transparency means for your organization is to determine whether your organization is covered under any state or local salary transparency laws and if so, what those requirements are, so you can make sure you comply with your compensation transparency policy.

Lifting that veil of secrecy makes it easy for employees and applicants to understand their compensation for a particular role and perhaps even how and why compensation decisions are made. Simon Sinek, who is a renowned business leader, author and speaker, said on LinkedIn, "Transparency doesn't mean sharing every detail. Transparency means providing the context for the decisions we make."

With this in mind, why are so many employers hesitant about this trend or this new normal? In conversations that we have with our clients, we hear fear. When employers start to think about becoming more transparent around compensation, they worry.

Will our employees leave if they find out what the maximum is that they can make in a position or will they find out they're at the bottom of the range? Will my employees lose their motivation? Will productivity bottom out? If employees know what another one's making, what kind of resentment or strife is going to cause?

If we arm our employees with information, are we just opening up this proverbial can of worms? Some employers are concerned about sharing salary information, because they don't have the budget to address any and every concern that may be brought forward. Some decisions are made because they don't have a rhyme or a reason as to how they do make decisions.

Perhaps decisions are made on an ad hoc basis when someone's promoted or when a counter offer is needed to retain an employee. Then there's always the one that makes us pause, but compensation is always private and we've always done it this way. For most employers, it's new ground. We get it. It can be nerve wracking to do things in a new and different way, but we're gonna show you some of the benefits of salary transparency that outweigh the fear that you might have and, of course, the growing trend for states and localities to pass new or expanded existing salary transparency laws. This is going to force employers to be more transparent with their compensation. Ready or not, compliance requirements and employee demands are going to necessitate more transparency.

Let's take a look at why this is a good idea. I've got a map here from Glassdoor for Employers. You see all the states that are there, you know. This, hopefully, might answer at least preliminary questions, what do I have to do? From bans on salary history inquiries to requirements of disclosing salary ranges, more and more states and municipalities are regulating salary history inquiry and requiring pay transparency.

Beyond these mandates, employees and job applicants are demanding it. There are several states that currently have pay transparency laws: Hawaii, Maryland, Colorado, Connecticut, Nevada, Rhode Island, Washington, California, New York, with the District of Columbia's new law effective later this year and Illinois' new law effective in 2025.

There are also localities with wage transparency ordinances, such as Jersey City, New Jersey, and New York City, Westchester County, Albany County, and Ithaca in New York. These laws have varying levels of requirements with respect to the types of compensation information that must be posted or disclosed, the method of those disclosures and the types of positions that are covered, among many details.

It's vital that multi-jurisdictional employers know and comply with all applicable requirements, and more may be coming. As of October last year, there are at least 15 states that are considering salary transparency legislation. Salary history bans are in the same vein as pay transparency laws and typically preclude employers from asking an applicant or their current or prior employers about their pay history or using an applicant's wage history information to determine their wages for the applied for position.

These laws are in effect in multiple states and localities. Please reach out to TriNet for more information. In addition, at the federal level, a federal pay transparency bill was introduced in mid-March 2023 that would require employers to provide wage ranges in any internal or external job postings and would also require employers to provide existing employees with their pay range for their position at the time of hire, annually and upon their request.

Even if you are hiring or have employees in states that don't currently have these requirements, it'll be important to watch the progress at the federal level. It is critical that you stay up to date on changing legal landscape. Wage transparency requirements are expanding to help reduce discrimination-based pay gaps, including closing the gender pay gap.

They're designed to promote fairness and equity in the workplace and to support the empowerment of workers in enforcing their right for equal pay for equal work. The goal of these laws is to increase employee confidence that their compensation process is fair. Increasing transparency further develops a culture of trust and the research supports this.

A trusting culture leads to improved talent acquisition efforts. Your ability to retain great talent improves. There's stronger engagement of employees who are productive and employees know they're paid fairly and equitably. We'll talk a little bit more about pay equity as a concept a bit later, but let's talk about those things that you're going to want to consider as you go down this transparency journey.

First and foremost, you need to know your organization, what's included in your total compensation, what do you as an organization believe about compensation and how are your core values reflected in your compensation practices? Does your pay structure reflect your values? If you're not sure about the answer, consider if you need to review or refresh your core values.

Here are some sample core values that would resonate with a solid compensation philosophy. I think we have a poll on this one, so I'll be curious to see what responses we get here.

Carol Ferrari:
Great, Kristin. Yeah, the responses for… make sure I got the right poll. Here we go. What best describes your salary transparency at your company? We have full salary transparency at 12.5%. Transparency as required by law at 50%. That's great. No salary transparency at 28.13% and no salary transparency, but plan to implement at about 9.3% or a little over almost 10%.

Kristin:
Got it. Thanks. So we really have spread that across. I'm glad to see that at least half of the people that are on the call, more than half, because we've got full transparency and legally required transparency sitting at around 75%. So that's amazing.

Okay. The pinnacle of knowing your business is also knowing, again, that organization and a compensation philosophy. If you don't have one, answer that question. What does your organization believe about compensation? This can be a guide for your compensation framework. In many cases, this can be shared with your employees to help explain compensation decisions.

Let's break down a few elements of a compensation philosophy. Start with your values. Many companies choose to incorporate an explanation of their values and principles into their philosophies.

Your pay strategy. One of the areas to consider is competitiveness within the market. For example, your organization may aim to pay among the top percentage of employers in order to attract new candidates into their pipeline.

Pay equity. This area states your commitment to ensuring fair and equitable pay practices across every level in your organization. While there may be some natural payment discrepancies resulting from factors like seniority and performance, successful philosophies create payment and reward structures that are fair overall and allow your organization to comply with applicable pay equity requirements.

Rewards and incentives. It provides guidance for special incentives or bonus payouts. Your company is adopted to motivate and retain your employees.

Then total rewards. You may choose to show the specific types of compensation employees can expect to receive. It can include things like base pay or benefits or additional compensation or even non-monetary rewards and incentives.

Lastly, any additional commitments that reflect your organization's philosophy around pay and compensation that allows you to attract and engage and retain your top talent. The goal of these is to motivate employees and keep them engaged in their work and satisfied with their compensation and of course meet wage pay transparencies.

So I know this leads to several questions, Carol, around inflation and pay. And so, I'm hoping you might be able to add some color around those topics.

Carol:
Absolutely, Kristin. Thank you. Yeah. The inflation and pay. I know we've all been experiencing these wild rates for labor. I'm going to take you through some factors to consider and then how to address some of the retention challenges and how to look at this inside your company.

First and foremost, I want to talk about, because there is some confusion, the cost of labor versus cost of living. They are two related, but very different things, and they affect how you approach your pay. Cost of labor is the how expensive it is to hire people in your area. The cost of labor is related to the supply and demand in a given market and it's usually geographic, but sometimes it's national, depending on the role. The cost of living is housing, food and fuel, etc. We as employers need to set viable and sustainable compensation factoring in the cost of labor. Another factor, consider what I mentioned is geographic.

Again, you may be competing with people across the street or companies across the street for your labor pool, or you may be competing at a national footprint for highly skilled labor or more skilled labor than in your local area. Kristin hit the nail home on pay transparency. When you're working with pay and inflation in these times, you need to be cognizant about the transparency.

If pay ranges are out there, right on the job postings, your employees are going to look at those things, but financially, you can't keep people if you are paying these astronomical rates. All of that needs to be taken into account when you're looking at your pay. And that's where we're going to address the retention areas.

Let's look at first, the method of setting the salary increases. So doing away with a one-size-fits-all strategy is probably the best method when you're setting your salary budgets. You should examine the competitive labor market and how it's changed in your area.

We have some tools for that, that we'll talk to you about in a little while. Segmenting when you look at your strategy is key here. There are certain high demand roles that may require an increased budget. There may be certain areas of the country where you might have to make changes that you didn't expect or you need to be cognizant of.

Long story, but all of us in the small business, small, medium-size businesses, one of the best strategies we can use because we don't have these astronomical budgets like the big companies have, you look at other reward elements. Many employers are opting into a bonus, a one-time bonus for those roles that you need to compensate for or short- and long-term incentives.

Recognition programs. So you need to look inside your company at this too. What is meaningful to your employees? What's valuable to your employees? It doesn't always have to be or should be your base pay. And then the final one is the communication side of this. Kristin nailed this very well. Be clear on what and how you pay, how are decisions made.

It doesn't mean you're plastering salaries all over about everybody, unless that's what your culture accepts and wants. But arm your people, your employees with the data that says how you pay and how you make those decisions. Arm your hiring managers with the right messaging and make sure you allow for two-way communication.

You're going to be providing things out, but be able to have your employees also ask questions and have that two-way dialogue. At the end of the day with inflation and pay, it's our job as employers to make sure that we keep our companies sustainable. They're going to grow and they want to be there for the long-term.

You have to really think about these smart compensation strategies in this kind of economy, and if and when we ever hit a downturn as well. On that note, the next trend that we're seeing in the market is the next one, which is remote compensation. Before I jump into this, I just saw a poll that came off the press on April 24th. Seventy percent of U.S. adults prefer a hybrid or in-person model for work schedule, according to the American Staffing Association, but the survey also indicated that there's certain pockets of people that like one versus the other. Interestingly, baby boomers, they prefer fully remote work, whereas only a quarter of the Gen Zs prefer that method.

And then people with young children prefer a hybrid schedule. How you address remote work in your organization is, again, a company policy. This slide is going to go over company policy versus how pay could be affected by this. It's kind of a combination. What you do and how you do it for remote compensation or not really depends on various factors.

I'm like a consultant, right. I say it depends. What budget and resources do you have financially? And this can influence how you, if you go with a role-based or location-based strategy or you're remote for your workers. The nature of work your company has if you're like Salary.com started out with 50 people in Massachusetts. Well, we were all in Massachusetts, really simple, location-based, but as we grew as a company and as we had to hire roles, we needed to look at role-based compensation because the roles weren't located in Massachusetts and they were different roles outside of marketing and sales and engineering, for example, they were wide variety.

So look at the nature of your work. Culturally, if you're a company that is committed to equity and inclusivity, you'd want to decide on pay for roles based, not location-based, because that is just another, it's a more transparent equilibrium for how you pay.

And then market competitiveness. Kristin mentioned this too. You need to know what's going on in the market. You need to know what your competitive, what in that area, if you're competing in your local area, if you're competing nationally, if you're competing in a certain industry, you need to have access to that information, which as I mentioned, we'll talk to you about some resources that are available to you.

And then Kristin did a great job about the legal and tax implications. So this will affect your overall budgets and what you would need to do on remote working versus hybrid or even local, in office work. Consideration of the minimum wages that are locally and federally, note that if your state's minimum wage is higher, it takes precedence over the federal.

There are pay transparency laws, as Kristin talked about and then consider the tax or legal implications. Again, all affecting remote role-based, how do I want to pay for my employees or how am I going to pay? It all affects your budget. And then again, you think about this today in this high inflation, very remote work oriented, but you're thinking about this too for the long-term.

Growth and sustainability again, what your strategy is today. You have to think about what roles do you need next year. What skills do you need? Can you use the people that are there today? Or do you have to hire new people? How is that going to affect your pay strategy? So it needs to be a good healthy combination of a short term focus and longer term where your company is going to get their growth from.

Kristin:
All interesting factors and a lot. There's a lot in the mix there, Carol. Thank you for sharing all of that.

Carol:
You're welcome.

Kristin:
All right. So circling back, we've got know your data and that's the areas like really understanding what the market is, what's happening, what's going on. And really you want to, Carol mentioned this already, looking at what are your competitors, what's the market share, what are customer expectations, laws, regulations and internal. You might want to think, is turnover in your organization negatively impacting your customer's experience or service continuity? Well, then maybe compensation is an area that you might need to explore to figure out how we might be able to stem the flow of people exiting our organization.

I know this particular slide here gets a lot of traction. What is the average increase? What should we be looking at? We're seeing a 3.9% average budgeted increase and you'll see the trends over the last couple of years where we had a spike in 2023. Carol's got some great information on some recent surveys that they did around trends for 2024.

Carol:
Thank you, Kristin. Yeah, we also do a study every year for the National Salary Budget Survey, we call it. For the third consecutive year, we also show results that most companies are planning a medium raise of 4% across all categories. I thought this slide was a good slice of our 2024 data to show you overall what's happening. It was interesting to me that the majority of the people were doing no change from this year over last, but then also interesting was the lower percentage. Almost 30% were lower and those were in certain industries. So media, hospitality, healthcare and retail on the higher end, which is around 14% and a little higher. Those were energy utilities, aerospace and financial services and construction.

Kristin:
I love it.

Carol:
Then we took the data and then we looked at our small medium business category is 250 FTEs or lower. How you look at this as a gauge, it's a guidepost to what companies in our size range are doing. If you used our Salary.com data resources, which you'll hear in a second, you'll be able to market price down to your specific ZIP code and see what's going on there.

The factors that increase your budget are based on your industry, your location, the nature of the roles in your company. Also, just note, if you were a participant in our survey this year for, sorry, next time, next survey, you'll be able to slice all this down to your geography, down to your state to understand what's going on there. That would be great. An interesting highlight on this data and how to use it, is just as I said, guideposts. How are you applying your merit versus your equity mix.

Then one more before I close is the interesting highlights from this year. Our data found that our friends in San Francisco usually are the leaders in salary medium budgets at 5% or over. Well, they dropped this year and our friends in Houston are now at the top with a 5% median salary budget. We like to say our friends in Houston are living high on the hog this year.

Kristin:
I love it. Go big or go home in Texas, I think is the example here. I love this slide because it really does break down the trends that you were saying. Like we're still seeing in small, medium-size businesses around that 4% or even a little bit higher. You would think about, particularly some of those critical roles that you need in order to move your business forward. We're still seeing those increases trend at the same rate that they were in 2023.

All right, so then the third pillar of this compensation transparency journey is ultimately, know your people. And Carol has really spoke to that as well. This includes what's knowing and valued by your staff and what motivates them, as well as being sure to consider the needs of your people manager and how to support them in these conversations. A couple areas to explore: what do your people want? You might want to consider the generational makeup of your employees.

While it's not a hard and fast rule, there are four groups to consider, Baby Boomers, Gen X, Millennials, and Gen Z. Each one may have different values, goals, or preferences when it comes to work and rewards. Using that above information is a starting point. Evaluate the options to understand what really matters to your people.

Use exit interviews, uncover the reasons they leave and what the future company is providing. Look for additional opportunities and then look at one-to-ones or performance reviews to really start to uncover what's important for your group. Lastly, you have to aggregate all that data up.

You can't look at things in a vacuum. Make sure you understand how everything intersects and interplays with each other. Develop a hypothesis, test to validate and understand, and then asking for input. If we did this, what would happen? Would you like this? Would you not like this? We know that employees are sharing their compensation stories with one another and pay transparency laws are requiring these job ranges to be posted in job postings.

Because of this, it's going to be important to equip your leaders with the tools to have robust, transparent conversations about their employees' pay. Let's talk just briefly about how TriNet can help. We've got a few ways to support. We mentioned already that compensation philosophy.

So if you need some help putting that together, compensation benchmarking, we'll talk a little bit about that. Job leveling matrix, which is a structure that aids in understanding a career pathway and compensation opportunities, think kind of basic career architecture. Competency profiles to really understand and dig into how do you get from role to role and what does that look like? Then critical role in talent philosophy. Let's look at some of the features that we have that are available to you. And Carol, maybe you could start with self-service.

Carol:
Sure. We're proud partners with TriNet, and available to you is access to a single sign on database for your job. You can price jobs throughout the country, you can match your job, what you're looking for to our really expert database of HR reported data. And all TriNet customers get preferred pricing, way underneath the list price for this. You can pay by report and you can also add scopes and get more granular as we call them to get more detailed pricing for yourselves.

Kristin:
I love it. And if you don't have the bandwidth to do that or you just need a little extra support, the organizational development team here at TriNet actually offers a full service, so we get into the information. All right. So we're going to wrap up here. I know we have just a short amount of time. Comply with current and future pay transparency requirements.

Ultimately, have a plan. Then we know what the wage increases are trending. Always contact us if you have any questions about it. We really appreciate your time with us today. I know we don't have time for Q& A. Thank you again for your time. And Carol, it was great partnering with you this afternoon.

Carol:
Same, Kristin. Thanks so much. Thanks, everyone. Have a great day.