Which is better? Making your employees the highest-paid in your market, or paying them less and showering them with benefits, amenities, and meaningful work? I discovered that there is no right answer, because it’s the wrong question.
The better question is, “What is your employment proposition, and how do your compensation programs reflect and support it?”
A lot of employers take a far-too-narrow view of compensation, looking only at the number on the pay stub and not embracing a total rewards perspective.
It’s easy to fall into this trap, especially in a competitive market for talent. As you sit down with prospective employees, you know that one of the most prominent questions on their minds is, “What will this job pay?” As a result, you might be tempted to ask, “What will it take?” That’s a dangerous question. Compensation is one of a business’ biggest fixed expenses, and a lot of other operating costs tie directly to pay. Throwing money at it is reckless.
Market survey data allows you to know how your pay compares to other similarly-sized organizations in your industry, geography, and market. Some employers let data alone drive their decisions, rigidly pegging pay levels to certain market percentiles. “We want to pay at or above the 75th percentile,” they might say. Or “We can’t afford to go above the 50th percentile.” By letting one factor dictate their decisions, these employers miss out on opportunities to have a broader discussion about the overall values and opportunity of working for them.
The Employment Proposition
A smart employer starts by establishing a clear rewards philosophy and focusing on the full employment proposition. What attitudes and culture should be defined by the employment proposition? What employee experience does the firm want to offer, and how does its compensation philosophy support that experience? The answers to these kinds of questions will create your own unique employment story.
With this story in hand, an employer will be able to look more purposefully at data from internal and external studies, and use that data to develop appropriate compensation practices. Then the employer can communicate and apply its practices in the context of its corporate culture. This will demonstrate to employees that leadership is being thoughtful about how it defines and invests in the total employment experience.
Through this process, an employer can see that it doesn’t need to boast about its high pay, or try to hide a lower-percentile salary structure behind its flashy perks. Instead, the employer can speak unapologetically about why people value being a part of its team and what they get from the overall employment experience.
Learn to communicate those points clearly and the people you hire will put much less emphasis on market percentiles and comparable benefits and much greater emphasis where it should be: on what it really means to work for your firm.