Compensation and HR professionals have consistently risen to challenges in the past few years that, perhaps at some point predictable, were nonetheless unimaginable. After a pandemic, a Great Resignation, Quiet Quitting and Quiet Firings, one thing we all learned is that there is no going back.
Reward professionals have charted new approaches to pay and rewards, effectively elevating their value as decision makers in attracting, engaging and retaining key talent that moves the business forward. Now, as tumultuous economies and talent markets begin to settle, compensation and HR professionals need to continue their pursuit of agile and resilient programs and practices that support well-thought compensation philosophies. In this spirit, we offer the top 5 trends to watch for in 2024.
01
Agility and resilience have been the name of the game in recent years with regard to approaches to pay (among other things, of course). The importance of knowing which jobs will be critical for organizational success and which skills will be highest in demand hit home like never before. The past few years also highlighted the need to identify future workforce trends so that organizations are ready and able to shift and maintain a steady course when the next big bump in the road comes along.
While accurately predicting the future may seem like one more unimaginable thing, you can prepare yourself for any eventuality. The most in-demand talent has the hottest skills for the jobs that are more critical for future success. As senior leaders see hot skills that are in the digital space, for example, they want to know how the organization is going to attract, engage and retain this key talent. These leaders may also fall into a fear-of-missing-out (FOMO) mindset.
You can proactively plan your response to senior leaders’ questions for these outcomes by knowing what information and intelligence is available on the market, where to get it and how to use it – all without putting your overarching compensation philosophy at risk. Knowing which additional data sources you need will support your cadence and business requirements. Those sources also will inform your talent predictions and needs to achieve those requirements.
Oftentimes, these sources will not be the same ones you use for your annual benchmarking activities. They can include pulse surveys, talent intelligence reports, specialized market practice reports, pay analytics and so on. Having these data sources at-hand when FOMO strikes will provide the support you need when you’re called on to quickly address unexpected market fluctuations, be they economic- or workforce-related.
Identifying sources of expanded competitive intelligence is only half the battle. You still need to ensure you have a strong understanding of the information you’re leaning on so you can make the most of it.
Of course, timely, accurate, quality data is exactly what you need to build the foundation of your annual compensation plans. As noted, pulse surveys provide a valuable source of just-in-time information when volatility spikes. Yet, it would be imprudent to simply take the first return on your Google search and treat it as truth – even when your employees come to you with questions about data they accessed through their own online searches.
In your quest for a repository of information sources, you will invariably come across web-scraped, crowdsourced and generative AI salary data. Yes, each of these data sources has its place, and these can be used as indicators or reference points in the absence of other validated data sources. It is important to remember, though, that these are still emerging information sources that have their own limitations.
For example, when monitoring the demand for talent, it may feel more real-time to leverage web-scraped data that scrapes job postings or recruitment websites, but it is an incomplete picture of overall current talent rates. That is, as it only reflects advertised salaries or salary ranges rather than actual pay for a particular job. In these cases, you may need to overlay immediately released data on top of other, more validated data sources to get a clearer picture of what’s truly happening in the market.
Exciting, emerging methods for gaining insights from data (e.g., generative AI) are good to explore and watch, but it is important to sanity-check what you find against your tried-and-true benchmark sources. Also, it’s important to remember that long-term salary adjustments should not be based on volatile data sources. You may end up over-paying your employees and inadvertently create a no-going-back situation.
02
The urgency around new and upcoming rules is increasing. If your organization operates in different locations and markets, you must be well-versed in local employment practices, including mandatory and non-mandatory policies around benefits, HR policies and practices, taxation, recruitment and turnover.
Going back to the first trend, you will need data sources that are constantly updated with market best practices and comprehensive descriptions of policy designs to comply with local legislation for HR programs, as well as compare global policies with country-level practices.
Rapid technological advancements and geo-political shifts are driving a constantly changing digital regulatory landscape. You need reliable vendors that consistently and thoroughly vet salary benchmark data and ensure strict compliance to global data privacy and anti-trust frameworks. Additionally, next-generation solutions can host multiple data sources securely, helping you easily comply with data protection standards across various geographies.
Last year, the European Parliament introduced the EU Pay Transparency Directive, the most comprehensive legislation introduced around pay transparency and equity. Additionally, similar regulations are emerging in locations around the world, but at different degrees and paces. It would be unnecessarily costly for a multinational organization to implement the same policies in every one of its locations when requirements are likely different based on local laws. Quality, highly localized data will be even more important this year, as it will serve as a touchpoint when various political and economic changes occur.
03
After several years of compensation and HR professionals’ time being dominated by singular, historical events that created an unprecedented sense of urgency, things are calming down … kind of. More typical short- and long-term pressures, influences and opportunities are emerging.
As noted, legislative changes and new employer mandates combined with increasingly aggressive collective bargaining agreements and geo-political upheavals that are removing once-affordable sources of offshore labor are driving employment costs around the world. While it would be ideal to implement global practices across all geographies, an increasingly complex world makes this impossible – at least from a logistical, cost effective and defensible position.
Of course, an organization’s pay philosophy is a different matter, and one of the fundamental questions your compensation philosophy answers is how to balance global consistency with local flexibility. Achieving this requires market intelligence that is specific to geographies and regions. Expect your reliance on localized data that supports your identification of new, affordable choices to increase.
At a more granular level, you also need to think about the workforce in each of your locations. How organizations source talent, define jobs and design work has changed. Segmenting workforces – regardless of whether they are in a single location or scattered around the world – will require an exploration of factors such as demand for skills, levels of experience (and the institutional knowledge that come with those levels), employee expectations and what the business needs to succeed.
Workforce planning will be more important than ever as organizations re-examine their definition of a job, the tasks that need to be fulfilled, and how roles can be reconstructed and balanced among permanent employees, contingent workers and automation/AI. Workforce analytics will play a key role in reviewing the overall effectiveness of your current organizational structure, providing an objective picture of your organization’s shape and size relative to evolving business and work goals.
04
The concept of total rewards optimization isn’t new, but the approach compensation and HR professionals take to achieve it is. Employee expectations have changed in the past few years, including expectations from their compensation and benefits programs – and that’s true in every location and industry. Employers are being forced to get creative about their offerings to effectively attract, engage and retain talent.
Ideally, there would be an unlimited budget that would allow compensation and HR professionals to pay whatever was needed to find and keep the talent the organization needs. But we don’t live in an ideal world, so that’s where creativity comes into play. However, before you start to dig into novel programs and practices that may be on-trend today, it’s important that you start with the basics. Questions to ask include:
Additionally, in the past two years we have seen an increase in cross-industry and cross-geography poaching of talent, as organizations have learned that flexible and remote work does work, and certain skills are transferable to new industries. This makes it critical for compensation and HR professionals to take a broader approach when they think about their total rewards offering – as well as the data on which they build their programs and practices.
Now is the time to investigate data from novel industry peer groups that you perhaps haven’t considered in the past because it didn’t seem to make sense. It also is important to understand what employees truly value. “Thinking outside the box” is cliché, yet apt when budgets are tight, the labor market is tight, and employees want to feel whole.
Additionally, given a pace of change that is only accelerating, HR and compensation planning teams should introduce or increase proactive conversations with the finance team. A close partnership with finance ensures well-rounded data and insights that support highly targeted spending strategies that protect and staff critical job families that are under threat from market movements.
05
ChatGPT and generative AI have been hot topics for everyone, from school children to executives. The introduction and use of generative AI technologies may have your organization leadership wondering whether the business has the right talent with the right skill sets to ride the wave of ChatGPT and other emerging systems. Remember: FOMO is real.
You need to be ready to conduct a comprehensive analysis both within your organization and the broader talent market to respond. Additionally, you need to be prepared to answer tough (and potentially misguided) questions when employees rely on these technologies to help build cases for increase pay and benefits.
You must understand the “how” and “what” of generative AI to decide whether it can serve as another potential source of information to consider. This technology is still in its infancy, and that introduces risk and misinterpretation – both of which are common today. For compensation and HR professionals, AI can be used as:
However, you need to remember the important role you play when it comes to leveraging any degree of generative AI. Rewards should never be a black box, built on mysterious sources that can’t be backed up or explained. In your role, you must recognize and communicate that validated compensation data is fact-based as opposed to AI-trained. As artificial intelligence and the attention around it continues to grow, it also will be imperative to remember your compensation philosophy and the trusted data you rely on that is backed by human intelligence.
While AI can serve as a resource for supplementing job descriptions or drafting employee communications, you should use these tools in combination with validated data sources as well as your experience and knowledge. This will help you discern where AI is still inaccurate and underperforming – and will serve the organization at-large by providing insights to inform broader AI strategy.
In the past few years, a series of unimaginable events pushed compensation and HR professionals to new heights in terms of addressing unexpected, rapid-fire talent and cost management issues. Having risen to the challenge so far, 2024 will see rewards professionals adding more skills to their repository that will support the continued development of the total rewards function, including:
The common denominator among these skill sets? Data.
However, not all data sources are equal, and not all external influences are felt the same way in all regions, industries and company sizes. Having the best, most trustworthy data and insights is important when making decisions about your organization’s largest investment: people. And a strong data partner ensures you can respond to questions that come from every level of the organization with solid, equitable and defensible answers.
