By Amy Shabacker Dufrane
This month, Dr. Amy Dufrane discusses the impact of compensation on employee engagement and more with Bridget Sedlock. Bridget is the Chief People Officer at National Student Clearinghouse, which serves the education and workforce communities and all learners with access to trusted data, related services and insights. She was previously an Area HR manager at Rolls-Royce North America, responsible for the delivery of HR services to over 1,300 employees in the Eastern and Southern U.S.
Bridget, thanks so much for joining me to discuss this important topic. At HRCI, we’ve been fielding inquiries regarding employee compensation. Similarly, I’ve been reading updates from top-tier advisory and research firms on the subject, especially as HR professionals and total rewards leaders are grappling with year-end planning and deciding what changes to make for 2023 and beyond. The Great Resignation, rising inflation and hybrid workforces have put undue pressure on the compensation topic. Do you think it has been ignored previously? Is it really at the heart of why employees work?
I don’t think that compensation has been unduly ignored previously, but I do think that COVID and the Great Resignation have changed the mindset of the workforce and candidates to focus on how they want to spend their time at work and outside of it. The labor market has moved away from what we were experiencing during the first year or so of COVID when no one was changing jobs, given the instability in the world. Employees and candidates are driving what they want: meaningful work, more money, job flexibility, and more. To attract or retain workers, companies started throwing money at people.
That said, I do not believe that money is at the heart of why employees work. Most people want to find meaning in the work that they do as well as feel appreciated for the work that they perform. As part of that, people need to feel that they are being compensated fairly. Finding the balance in this past year of fair compensation versus the market-driven rise in overall compensation has been a challenge for organizations.
Do you think there is a clear-cut relationship between compensation and employee engagement?
There is definitely a link between compensation and employee engagement. If not managed carefully, the topic of compensation can limit employee engagement to be at its fullest potential. What I mean is there can be a relationship between the two, if staff don’t believe that they understand how compensation is determined or they don’t believe they are being compensated fairly, then it is more challenging to raise the conversation to the next level.
It’s more critical than ever for HR professionals to think out-of-the-box and provide more creative solutions. The workforce is no longer homogeneous and what attracts and retains talent can vary greatly. I always talk to our team about needing to consider their total rewards package, not just their base salary. Many organizations, such as ours, focus on the holistic total rewards that they offer when they determine competitiveness in the market. We encourage our workforce to consider base pay, bonus opportunities, benefits offerings – 401k, benefits costs, time off, flexible work, and other perks – and company culture and mission in determining if an organization meets their career and personal goals.
I don’t think compensation can inspire employees to engage at higher levels, but I do believe that employees who do not feel that they are being treated fairly will disengage.
Should compensation be discussed openly and transparently? For example, should job postings include comp ranges? Should remote workers have their comp adjusted accordingly?
States and localities are legislating requirements for pay transparency, so the future is headed that way. Companies are challenged to have or to build an infrastructure that supports open and candid conversations about compensation. HR professionals can help support the organization in this effort, but it also requires educating leadership to take ownership in this conversation. As far as transparency beyond internal policies, I’m in support of including compensation specifics for job postings if they are in the form of a pay range, so candidates have an understanding that employers consider skills, credentials, years of experience, etc., in that context. It’s still important that organizations can differentiate pay based on qualifications and experience for the role. Education for staff is also critical to ensure there is an understanding of how compensation is determined.
The new remote world is complicated. Most organizations are still trying to figure out how to best support it. For example, if there was a locality-based pay structure in place, does that continues? Or do organizations move to a national average pay structure that recognizes employees are moving to other locations easily and pay stays fairly stable. It’s not realistic to increase and decrease pay with each move.
We’re all watching the economic indicators closely. Will companies that lay off workers pre-emptively need to pay more for talent when they need to recruit?
The current talent market is challenging, and I’m not sure that I have all the answers. Companies are starting to lay off highly compensated staff who might have been hired during the recent quest for talent while still hiring for critical staffing shortages. We are navigating unprecedented times – at the Clearinghouse, we worked hard to manage through the pandemic and not take negative employment actions. We avoided layoffs, reduced work hours while still proving merit increases, and kept our staff employed. Some tough short-term decisions – in particular around our 401k match – and a focus on employee safety and wellbeing ensured we could keep everyone employed.
Bridget, it has been such a pleasure being able to interview you on this important subject. In closing, would you tell me what Clearinghouse has done around comp and benefits?
Among the things that the Clearinghouse did in 2022 around compensation and benefits included a 4% across the board market adjustment in March for all staff, an increased target merit budget for all staff in July, and merit bonuses were also awarded to top performers. We did a holistic salary range review with a third-party consultant to ensure our salaries are competitive with the market (and additional adjustments will be made if they are warranted). We reinstated a competitive 401k employer match of two for one. We have a generous leave program, including three weeks of vacation after the first year based on service and it increases up to almost six weeks over time. Employees after 10 years of service can participate in our vacation buyback program. We pay 100% for short-and long-term disability insurance. And we also offered a new low-cost healthcare plan that is free for employee coverage. We added more options for those who might want a lower cost option for themselves and their families.
Today’s dynamic business environment begs for additional insights into why we have experienced unexpected, tumultuous workplace upheaval. Total rewards as it relates to employee engagement will continue to be a significant focus as we move into 2023 and beyond. Ignoring it now will result in giving rise to employee flight risks, compromised employer brands, and decreased business opportunities.
