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Compensation Trends: Ensure your pay strategy is competitive and more resilient to unforeseen events

Topics: Comp Strategy

When the economy was up, HR and compensation professionals were mostly focused on recruitment, training, and retention. Recent times, however, required that focus to shift to employee safety, productivity and performance, and diversity, equity and inclusion. As more organizations are embracing permanent changes to the way we work—including remote and flexibility in where we work—these changes are shaping how organizations should view its compensation practices moving forward.


Compensation and HR professionals should adjust their organization’s pay practices now to keep pace with how work and pay are trending going into 2022. Compensation strategies that worked a year ago are being critically examined across organizations. HR and compensation professionals and leaders are exploring new solutions, evaluating long held beliefs, and innovating to support both the well-being and productivity of their workforces. Here are some key emerging trends around pay practices that organizations should get ahead of to remain competitive and grow.

1. Compensation strategy: After an unpredictable year, more organizations are seeing the need to invest in an effective pay strategy, compensation technology with access to market data to tackle shifts in the economy and unforeseen events, and to meet new employee expectations such as permanent remote work opportunities.

Compensation strategy is a mix of people, processes, technology, and data for how your organization competes when it comes to the costs associated with human capital. It begins with developing a compensation philosophy and pay structures, and determining what differentials influence higher pay. With the basics in place, employers can be confident in its approach to compensation and institute some elements of pay transparency and communications. However, modernizing and investing in HR and compensation technology will become key for organizations to effectively manage salary across the organization in a fair, equitable, and competitive way.

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2. Pay ranges and structure: Employees are more informed today about the market rate of their positions and will move onto other opportunities if they feel they are being underpaid. Pay ranges aligned to your talent strategy will bring in the right people into your organization with confident offers and mitigates the risks of turnover caused by inequitable pay practices.

Establishing a pay structure supports an organization’s growth with consistency in hiring with wages relative to the market and what you want to reward; increases to offer acceptance rates with data-driven offers; and reduces risks around pay inequities with solid pay ranges put in place. Going further, more advanced initiatives will allow for managing pay continually as the organization ladders up its compensation maturity to better handle internal and external changes and impacts.

3. Total rewards package: It should come as no surprise that base pay increases declined when the pandemic hit (63.7 percent of organizations gave base pay raises in 2020), and that trajectory continued into 2021. It was understandable to hold back on pay increases when organizations weren’t hitting revenue targets in an unstable economy, however, as the labor market heats up going into 2022—existing employees and prospective hires will not accept pay at pre-pandemic levels. Base pay increases and promotions lead as the top incentive choices to reward top performers, followed by career development, a bonus plan, and recognition. Benefits—including but not limited to paid holidays, health and wellness programs, employer-paid healthcare, and 403b or 401k—should remain a constant.

Variable pay constitutes all cash compensation that is paid to the employees above or in addition to their base pay. Variable pay includes any type of bonus, incentive pay, or sales commission that is based on performance or not guaranteed—rewarding employees for effort and impact rather than trading time for a paycheck. Therefore, a total rewards approach will be beneficial for organizations to adopt moving forward. Total rewards can include non-monetary benefits such as recognition, a flexible work schedule, remote work, or choice in work location. Providing the right mix of compensation, benefits, rewards, and perks is going to be key to attracting, retaining, and engaging talent in 2022.

Payscale solutions and data can help HR and compensation professionals steer their organization’s pay strategy in the right direction and find the skills and retain the talent needed for the future of the business. Learn more about these trends in our 2021 Compensation Best Practices Report.

Tina Gunn
Digital Content Strategist at Payscale
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