March 1, 2021
Spot bonuses or wellness benefits? How to create better compensation and win the war for talent
People teams frequently ask for recommendations for attracting and retaining top talent. Should they initiate Summer Fridays? Or a #kudos channel on Slack? How about spot bonuses and wellness benefits?
A record number of employees are quitting their jobs. Combine that with the long-term “skills mismatch” problem and it’s no surprise that employers are struggling to hire and retain talent. The Great Resignation is threatening to stunt even the fastest-growing companies.
There isn’t a one-size-fits-all answer. People teams must adapt by first understanding their organization’s relative competitiveness in the marketplace and then iterating upward. No two organizations, cultures, or employees are the same. It’s key to understand your unique dynamics and operate accordingly.
First, identify the relative competitiveness of your overall compensation
For decades, psychologists have used Maslow’s Hierarchy of Needs to understand and describe human motivations and behavior. Put simply, it states that humans prioritize activities sequentially, moving to the next most important priority only once the current one has been sufficiently achieved.
Just like how humans prioritize basic survival before fun and relaxation, so too your organization’s approach to compensation needs to solve for the bare necessities before getting lavish. For example, your office amenities don’t matter much if employees aren’t compensated enough to live anywhere near your office without a frustratingly long commute.
Of course, every human, role, organization, and industry is different. There’s no universal hierarchy of compensation packages. What’s considered competitive in one industry might be considered stingy in another. That being said, you can still use a general model for making sure that you’ve prioritized the essentials first, so that employees actually appreciate when you layer on more generous offerings.
People teams should consider a number of quantitative and qualitative metrics to assess where the organization generally stands and what areas to prioritize. Are employees unmotivated or are they working at hyperspeed and burning out? Are you losing employees to larger and more generous employers or to nimbler and more collaborative upstarts? What feedback are you receiving from employee surveys and Glassdoor reviews?
Spot bonuses might be a good way to motivate and reward employees for going above and beyond, while Summer Fridays will help limit burnout.
The functional difference between salary and everything else
Some organizations feel overwhelmed by all the moving parts related to hiring and retaining top talent, especially because the goalposts for success continuously move. Rather than developing a bespoke and dynamic overall compensation plan, some companies consider whether directly increasing salary alone is the simplest and most straightforward approach.
While that may seem like a far easier and simpler solution, it ignores reality. Refer back to the hierarchy – salary is the first rung on the ladder, but once satisfied there are higher order objectives. As the saying goes, “money can’t buy happiness.”
There’s overwhelming research showing that employees want and need more than salary. Consider the following:
- There is only a modest correlation between job satisfaction and compensation. Doing meaningful work is more important. Read in Harvard Business Review →
- An organization that “cares about employees’ wellbeing” is the #1 demand for Millennial and Gen Z workers. Read in Gallup →
- More than half of employees would take a pay cut in exchange for a more “empathic organization.” Read in Inc. →
There are some obvious reasons that explain why salary isn’t the end all be all. Here are just a few reasons that higher order objectives can’t be solved with salary alone:
- Healthcare: There are tax advantages to employer-provided healthcare. Employers can also negotiate better rates than individuals can get on their own.
- Job: For many workers, managers have a more significant impact than physicians on their physical and mental health. There’s no monetary equivalence to properly defined jobs with skilled and empathic managers.
- Wellness: Allowances and stipends for wellness purchases sends an important message to your workforce about your priorities as an employer. Further, like healthcare, you can access better pricing and offerings than an individual could on their own.
Taking the next step and becoming a better employer
After you’ve assessed your organization’s compensation objectives and get key stakeholder buy-in, you need to determine the required investment and find the right programs and vendors.
Typically, the employers that use JOON are the most forward-thinking and competitive in their respective industries. They already have (or are on their way toward) top-rated cultures and are now focused on the top of the compensation hierarchy, introducing programs and benefits to foster a culture of wellness within their organizations.
We’ve co-developed the following resources with them: