For employees, compensation is personal. It’s the point where an employee’s professional setup meets their personal needs. Employees don’t just see a paycheck – they see security, home ownership, college tuition, family vacations, the chance to own a new car, and more. When employees perceive an imbalance between income and lifestyle, there is typically one answer to the problem: ask for more money or find a better-paying job.
For employers, compensation is transactional. Employee salaries typically make up the largest piece of the budgetary pie. Ensuring that piece doesn’t grow out of proportion is a key focus of leadership. It’s standard for managers to relate to employees in terms of their ROI for the company’s bottom line. Especially in a recession. But focusing on the line item instead of the individual will cost more in the long run.
How often do employers ask their employees what they need?
Not the basic things everyone knows – food, shelter, etc. Those are a given. But how often are employees asked what they really need? What are the personal building blocks that, when put together just so, amount to a full and meaningful life?
The problem, from the employer’s standpoint, is that increasing one employee’s salary has a domino effect. Indirect HR costs associated with that employee will go up proportionally. Coworkers may catch wind of the increase and start asking for the same. Negotiations commence. Before too long, the company compensation plan has been inadvertently bloated.
There is a better way.
According to a recent report, only 13% of companies survey employees to understand what they need. An annual feedback survey can be an incredibly valuable tool, but change can start from a more humble beginning: a 1:1 conversation.
Imagine Brian, a top performing data-analyst, wants to purchase his first home. In order to get that down payment, and armed with his excellent track record, he asks for a dramatic increase in salary. Not wanting to lose a star player and deal with the exorbitant costs of replacing a skilled employee, his employer could respond by… (A) negotiating/ultimately agreeing to the pay increase or (B) having a meaningful conversation about what is driving this ask, and how the company could help with his personal goal of homeownership. Option A is narrow-minded. Option B is full of opportunity to provide a personalized and meaningful solution to a key employee while not unnecessarily bloating the employer’s compensation plan.
Brian’s employer could simultaneously reward his great work and help him with his personal goal of homeownership by setting up a vesting cash bonus with Keep tied to a personal performance goal. This gives Brian a lump sum of cash he could use right away towards a down payment. The performance challenge allows his vesting timeline to be reduced as Brian hits milestones established by his manager. Brian comes out of this feeling valued at work and supported in a personally meaningful way. His employer retains a star employee who is motivated to work towards his personal performance goals. By avoiding the dramatic salary increase, there is room to develop Brian professionally as their mutually beneficial working relationship continues.
Without seeing compensation the way employees do – as a bridge to the personal and meaningful things in life – employers are missing an opportunity. Personalized compensation can fortify a positive working environment without inflating the bottom line. All it takes is that first step – asking what employees actually need.
Talk to Keep about how to take a more personal approach to compensation for your employees – and keep your top talent on your own terms. Schedule a demo today.