Reviving Your Compensation Plan

ve been reading a lot lately about what Compensation will look like in the future and I remembered a project that I had once worked on. It was in Hong Kong — the Asia Pacific headquarters of a global company.

Word was the employees were not happy with their pay package. Some wanted more salary, some more medical, some more vacation, etc.

For example, one single man told me it wasn’t fair that the company decided everything about his package and didn’t ask him what he wanted/didn’t want. He wanted more vacation and would take less salary in order to get it.

I couldn’t see anything unreasonable about his request. Yes, some companies offered flex benefits — but this situation included cash compensation as well.

Most companies continue to design traditional programs based on a one-size-fits-all approach. Instead of this, what if companies changed their approach? What if they handed over control to employees to configure the amount of their own benefits, perks, and cash compensation — creating a package unique to their own personal situations.

I talked with a random sample of employees — young, old, single, married with/without children. This was a diverse group and I could see why their needs/wants might be different. The recurring theme was that they would like to have some say in how their pay package was structured.

14893672221_33f420fdd4_cLong story short — the regional Controller and I calculated the total cost of each employee’s current package. Then to keep things simple, we gave each one a pie chart with sections apportioned for each pay component and its percentage of the whole pie as well as the cost of each one.

Employees then drew their own pie charts reconfigured to show components they wanted in the future as well as the percentages of each to the total package. Since they had the total cost of their current package, the total of their new package had to match it. The company wanted employees to have at least some medical and life insurance coverage so there was a minimum level for these benefits that had to be included. Everything else, the employee decided.

As we went through this process we saw several positives that we hadn’t anticipated. Getting employees involved accomplished several things:

1) Employees became aware of the total cost of their package — not just the cash portion. Traditional “benefits statements” are fine, but this was different. Just seeing their package was not as good as knowing they could change it.

2) They talked at length among themselves about the ramifications of choosing greater/lesser amounts of each available component they could “flex.”

3) Compensation and benefits became transparent and employees gained a better understanding of how Compensation worked.

The result? The best communication of compensation and benefits the company could ever have hoped for.

Unsophisticated? No doubt — but it was a start. Administrative burden? The Controller was willing to take on the extra work. It helped that the number of employees was only ~40. Best practice? This became the best practice for THEIR company.

I’m not aware of any formal research that’s been done on this approach but is that really important? If it works, isn’t that the real test? Besides research studies can’t keep up with the pace of business today. Companies have to be nimble and quick to change course. Compensation needs to be too. Waiting for research to tell you if a practice is OK will leave you behind in the dust.

We have an increasingly diverse and young workforce that has different values and work-life issues. Getting free Friday lunches is great, but some employees would rather work through lunch in order to leave the office early to spend more time with family.


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