Kathi Enderes - HR Tech 2024 - Breaking Free From Outdated Pay Practices
HR Data Labs podcast
Deep Dive
Why have compensation practices remained stagnant for decades?
Most organizations still rely on outdated 1980s compensation models, using spreadsheets and lacking transparency, personalization, and tech-enabled processes. These practices are insular and fail to connect with the modern employee experience.
How does compensation impact the employee experience?
Compensation is the most critical factor in the employee experience. If employees feel underpaid, it disengages them and distracts them from their work, regardless of other benefits or perks.
What role does pay transparency play in modern compensation?
Pay transparency laws, like those in Colorado and the EU, are pushing organizations to be more open about salary ranges. Companies like SAP are already sharing salary ranges globally, making compensation more accessible to employees.
Why is simplifying compensation communication important?
Employees don't understand HR jargon like comp ratio or range penetration. Simplifying communication ensures that employees can grasp compensation strategies and feel informed about their pay, reducing confusion and frustration.
How can organizations modernize their compensation approach?
Organizations should move away from merit-based increases and adopt targeted incentive programs. This approach avoids introducing pay inequities and allows for more flexibility in rewarding performance without increasing the base salary cost line.
What are the risks of only complying with pay transparency laws?
Compliance alone may not address deeper issues like pay equity. Simply posting salary ranges without ensuring fairness can still lead to inequities, especially if hiring practices or promotions are biased.
How can AI improve compensation communication?
AI can personalize compensation communication, making it easier for employees to understand their pay and benefits. It can also help managers communicate compensation decisions more effectively, reducing the risk of miscommunication.
Why should organizations embrace pay transparency beyond legal requirements?
Beyond compliance, pay transparency builds trust with employees. When employees see that the company is transparent and fair, it enhances their engagement and loyalty, even if they discover they were underpaid in the past.
What is the potential of AI in future compensation practices?
AI could enable personalized compensation, allowing employees to tailor their pay and benefits based on their needs. For example, employees could choose to allocate more of their compensation to bonuses in years when they have fewer financial obligations.
Why are merit-based pay increases problematic?
Merit-based increases can create pay inequities over time, as high performers receive larger increases, widening the gap between them and other employees. This can reduce overall pay equity and complicate future compensation adjustments.
- Many companies still use 1980s compensation models.
- Compensation is crucial for employee experience.
- Current models are not tech-enabled and lack transparency.
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