Pay Practices That Engage and Retain

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Companies spend millions of dollars per year on compensation consultants

to make sure they are designing or redesigning their pay plans to fit their

business cultures and objectives. So, it would be misleading to suggest that

there are best practices that work equally well for organizations of all sizes

and situations. However, there are definite trends in the way companies

are choosing to pay their workers that appear to be more motivating and

appropriate for the times and for newer generations of workers.

Companies have gradually replaced old pay practices with newer pay

practices that meet new worker expectations. In the 1960s, 1970s, and even

into the 1980s, most companies rewarded tenure over performance and

created an entitlement mentality in much of the workforce. Workers

‘‘owned’’ their jobs and most companies were stable and paternalistic.

Companies absorbed pay and benefit costs regardless of their ability to pay.

With the late 1980s and 1990s came downsizings and the flattening of

organizations and with these, the loss of worker trust and loyalty. Workers

were no longer entitled to their jobs, but had to learn new skills to stay

employable. People found more flexible ways of working—from home,

part-time, and temporary. Pay and benefit costs were cut along with jobs.

There was a severe loss of workforce commitment that lingers today.

When talent became scarce compared to job growth in the late 1990s,

companies actually started believing the words they had always mouthed—

people really are a source of competitive advantage. Talented people had

other options than working for companies that did not value them highly.

Companies woke up to the fact that they needed to invest in their workforces

and form win-win partnerships. This meant more open communication,

more coaching, training, stock options, signing bonuses, creative

perks, and generous benefits.

During the economic downturn of 2001, many employers began cutting

back on perks, benefits, and signing bonuses. Employees started ‘‘treehugging’’

their jobs, in spite of the fact that they were asked to do more

with less. At this writing, most experts believe the war for talent will return

as the economy continues to grow while boomers retire in large numbers.

If this happens, companies will realize anew that people work for more

than just pay and benefits—they work for what we now call ‘‘total rewards,’’

the most meaningful of which are not related to pay.

Here then are some of the best pay practices that many preeminent

employers have begun to embrace to better engage and retain their talent: