The present moment marks the intersection of the future of work and the need for organizations to fine-tune their compensation strategies. As a significant component of operational expenses, an effective compensation program is pivotal in recruiting, retaining, and engaging top talent while maintaining financial stability. As we step into 2022, HR leaders should prioritize specific investments and activities to modernize their compensation and benefits approaches. Here are key considerations for firms gearing up for the challenges and opportunities of the coming year:

1. Reimagining Business Operations

Adapting to the evolving landscape requires a reevaluation of current business operations. Enhancing compensation practices, refining pay strategies, and administering innovative benefits programs geared towards talent security and flexibility are essential components of this recalibration.

2. Addressing the Talent Challenge

A significant hurdle faced by HR in the current landscape is the talent shortage, exacerbated by the ongoing pandemic. Shifting strategic priorities to prioritize employee well-being, mental health, and effective management of remote workers is imperative. With salary increases expected to rise globally in 2022, organizations must employ diverse strategies to engage employees and navigate the dynamic business environment successfully.

3. Employer-Sponsored Healthcare

Health benefits spending is projected to return to pre-pandemic levels in 2022, according to Mercer’s National Survey of Employer-Sponsored Health Plans 2021. To manage increased organizational costs, employers should focus on optimizing medical plan design, financial strategies, and delivery mechanisms. Comprehensive healthcare and wellness benefits can actively promote employee well-being.

4. Pay Equity Imperative

The issue of pay equity is gaining prominence, requiring organizations to identify and rectify biases in compensation. Legislation aimed at curbing pay discrimination is emerging globally, necessitating transparency in reporting pay gaps. Companies are proactively analyzing and addressing pay disparities based on gender, race, and age through promotions, raises, and equity adjustments.

5. Variable Pay Strategies

Businesses can use variable pay to incentivize performance, shifting away from a heavy reliance on fixed pay. Techniques such as annual pay increases, bonuses, spot recognitions, and team awards can be employed. A competitive analysis and benchmarking are crucial for transitioning to variable pay, ensuring alignment with market values.

6. Transparent Compensation Policies

Transparency in compensation is increasingly vital, requiring HR professionals to develop strategies that promote equitable compensation. Companies are sharing more salary information with employees, including pay details, compensation packages, salary bands, and pay equity comparisons, fostering trust and transparency.

7. Flexibility as a Desirable Perk

Remote work and flexible schedules have become integral benefits to attract top talent. Once considered exclusive to startups, these benefits are now standard offerings for businesses of all sizes. Companies embracing autonomy, flexibility, and trust in the workplace are poised to attract and nurture the next generation of talent, cultivating an employee-centric culture.