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Report Uncovers Compensation Secrets to Success in the War for Talent



“The war for talent isn’t over; it’s just on pause,” declares the latest Compensation Best Practices Report from Payscale.

While white-collar workers are experiencing layoffs, hiring slowdowns and intense competition for employment opportunities, blue-collar occupations continue to experience labor shortages and higher wage growth, according to the report.

Payscale identified compensation and recruiting as the biggest challenges facing HR leaders right now. Therefore, compensation needs to be revisited or formalized as part of your recruitment strategy to attract top performers. Consider that:

  • 82% percent of businesses either have a compensation strategy or are working on one
  • 44% of organizations say they’re building or changing their strategy (42% reported that they were in 2023), and
  • 62% of organizations either have, or are targeting, market-based pay structures (job-based or grade-based).

Here’s a breakdown of key findings from the report, which surveyed 5,735 individual contributors, managers and executives across a wide variety of industries.

Salary Ranges Take Center Stage

Payscale found there’s a significant shift towards pay transparency. An eyebrow-raising 60% of organizations now publish salary ranges in job ads, a 15% increase from last year.

Research by ZipRecruiter found that job postings that include salary data result in 50% more applications and are three times more likely to deliver quality candidates.

The pay transparency trend is fueled by two key factors:

  • Legislation: Several states and localities have enacted or proposed laws requiring employers to disclose salary ranges upon request or in job postings. For many employers, it’s either be up front about your compensation or face potential legal ramifications.
  • Candidate expectations: Today’s job seekers increasingly value up-front information about compensation. Disclosing salary ranges shows that you respect their time and enables them to pursue career opportunities that most align with their financial goals.

Pay transparency contributes to a more efficient recruitment process by attracting candidates with realistic compensation expectations.

Requesting Salary History Becoming More Taboo

According to the report, it’s against the law in about half of all states to ask a job applicant for compensation history, yet some employers (11%) still admit to doing so regardless of location (including where it’s illegal). Nineteen percent say they ask for it only where it’s allowed.

Meanwhile, 45% of organizations said they don’t ask about salary history, an increase over last year. If you haven’t done so already, you may want to consider joining this crowd.

The Pay Gap Narrows (Slowly)

Pay equity can be attractive to prospective employees as part of your employer value proposition. The report suggests the gender pay gap has narrowed slightly. For example, 71% of organizations analyze pay equity by gender (just 56% did so in 2023).

According to the report: “Organizations are also more likely to know their controlled pay gap compared to their uncontrolled pay gap, meaning how men and women are paid in the same or similar jobs vs. men and women holistically. However, it is important to measure both if the objective is equality in the workplace, rather than just avoiding potential lawsuits.”

This underscores the need for continued vigilance in achieving pay equity. Here’s what you can do to bridge the gap:

  • Use reliable salary data to benchmark compensation for roles within your organization: This allows you to identify potential pay disparities and take corrective measures. Popular sources cited were salary survey data from traditional publishers (49%), free or open online data (48%) and HR-reported aggregate market data in compensation software (45%).
  • Focus on objective criteria: Ensure that all compensation decisions are based on experience and qualifications. Eliminate any potential bias based on gender, race, age, disability, veteran status, sexual orientation or religion.

Another Piece of the Puzzle

Another noteworthy workplace trend is skills-based hiring. Many organizations are moving away from degree requirements to focus on demonstrably valuable skills. This opens the talent pool to a wider range of qualified individuals, cultivating diversity and potentially uncovering hidden gems who have everything it takes to excel in a role.

This also means considering skills-based pay dependent on knowledge, experience and compensable skills rather than the job title. “Skills-based pay can be effective at engaging employees by rewarding skills attainment or increased competency with pay progression,” the report said.

More than half (58%) of organizations say they compensate for skills eligible for pay premiums due to high demand. The most popular ways to compensate for competitive skills are:

  • Apply a premium to base pay (50%)
  • Apply a one-time bonus (26%), or
  • Apply a periodic bonus (19%).

Here’s how to adapt to this trend:

  • Revamp job descriptions: Shift the focus from degree requirements to the specific skills and experience required for success in the role. Highlight technical skills and soft skills, and
  • Implement skills-based assessments: Complement traditional interviews with skills-based assessments that objectively evaluate a candidate’s proficiency in the required skillsets. This provides a more accurate measure of their capabilities than relying solely on educational background.

Beyond the Initial Offer: Compensation and Retention

While offering competitive salaries and benefits is crucial for attracting top talent, they’re also equally important for keeping them. Here are strategies for creating a compensation package to promote loyalty among new hires:

  • Develop clear compensation structures: Design transparent compensation structures with well-defined salary bands and clear promotion paths. On average, companies say that 88% of their jobs have a formal pay structure, according to the Payscale report. This gives employees a roadmap for career advancement and salary progression.
  • Offer incentives for top performers: Consider offering bonuses, profit-sharing plans or stock options to reward high performers and incentivize them to stay with the company.
  • Invest in employee development: Provide opportunities for skill development and career growth through training programs, conferences or tuition reimbursement. This demonstrates your commitment to their long-term success and increases employee satisfaction.

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