Hybrid working is the new standard.
Given that more and more employees are demanding flexibility from their businesses, the traditional nine-to-five is not an option.
According to recent studies, most workers want their company to provide a variety of working arrangements so they can work both in-person and remotely.
This idea is not new, but the epidemic has made it a necessity rather than a nice-to-have, requiring firms to reconsider how their company will function or risk losing employees in the great resignation.
In the UK, the number of open jobs surpassed one million for the first time ever in August 2021.
What do you actually need to know about working in a hybrid environment?
Equity compensation is a crucial issue that requires immediate attention, even while HR leaders have been engaged in reworking work structures to satisfy these changing expectations. Traditional pay methods are facing pressure to change as teams become more dispersed and boundaries become hazy.
Continue reading to learn about the potential benefits of hybrid working, how to overcome the obstacles, and how to transition your company to a successful and customized hybrid working model by 2025. So, how are equity frameworks changing as a result of mobility, remote employment, and global hiring? Let’s study in depth.
Impact of Remote Work on Equity Frameworks
At 35%, hybrid workers had the greatest engagement rates, followed by entirely remote workers at 33% and in-office workers at 27%. Accordingly, hybrid models might provide the ideal equilibrium for worker engagement.
More people are working from home or from different places now, so it’s time to rethink how equity is given out. Companies are hiring from all over the world, and employees are moving around more. That means HR teams need to update their plans to follow local rules and taxes. With remote work and global hiring, the old ways of doing compensation don’t work anymore. HR needs to make sure their equity plans are fair, legal, and work no matter where someone lives.
7 Steps to Get Equity Compensation Planning Right: What HR Leaders Should Consider
The seven actions listed below will help you succeed with hybrid planning in this type of task.
1. Develop your philosophy of compensation
An organization’s guiding ideas and ideals for all compensation decisions, from determining salary to creating overall rewards, are outlined in a compensation philosophy, which is a defined set of values.
When candidates and workers know the ‘why’ behind your company’s compensation philosophy and initiatives, they are far more likely to accept an offer and stay happy, valuable team members.
Take into account the following queries as you transition to hybrid:
- How much should pay vary by location for different levels and functions?
- Is it possible to design policies that apply to all areas and the entire organization?
- If some employees work remotely while others are in the office, how can we guarantee fair compensation and promotions?
2. Conduct an analysis using data that accurately represents your company
Good data is essential for defining your talent market and market positioning in your compensation strategy. Even though it’s the most fundamental aspect of planning, many businesses make the mistake of purchasing traditional pay surveys that aren’t current or verified and may represent businesses that are much different in size or sector from their own.
Do you want to be compensated? Make sure your data: represents the size and stage of your company (data for more established companies is easier to obtain but not comparable); is from a reliable source (no self-reported surveys, as markets change quickly); and includes roles and specialties that are representative of your organization (e.g., hardware engineers, aeronautical engineers, credit analysts, telehealth clinicians, etc.).
Did you know that companies in the “information and communication” sector had the largest percentage of hybrid workers (49%), closely followed by those in the “professional, scientific, and technical activities” sector (42%), according to the December 2023 Business Insights and Conditions Survey (BICS).
3. To guarantee pay equity, identify any disparities
Pay comparison is possible after your talent market has been established and your jobs, responsibilities, and levels have been harmonized. You can use the information from your market study to guide your compensation philosophy and make adjustments for regions, strong achievers, and discrepancies. Any gaps that need to be filled are found by the analysis.
For instance, you can raise a valuable employee’s portion of equity, give them a spot bonus, or shift them to a higher band in their new geographic if they choose to relocate to a less expensive area while still receiving market pay.
4. Utilize groups to address opportunities and talent needs
The places where employees are already located nearby should be identified by your investigation; these could be your top hiring priorities.
For instance, you may set up shop in a university town with a prominent engineering department if you need engineering talent. Alternatively, it might be beneficial to have an employee base in a specific location if you have a solid clientele there.
5. Verify adherence
Nevertheless, establishing corporations in several jurisdictions is expensive and time-consuming. Every state and nation has its own local payroll and labor laws and reporting procedures, which can also differ significantly by group of employees. This is a big management task that, if done poorly, can have serious financial repercussions.
Over time, it will become increasingly crucial for compensation professionals to guarantee compliance, ideally in a manner that offers transparent audit trails that facilitate simple forensics.
All of this results in a setting where you can work with assurance, knowing that you are following current and changing antitrust and compliance laws.
6. Utilize geographic differences to manage complexity
The use of geographic differences is another strategy for handling complexity. Geographical differences offer a straightforward approach to money management while maintaining competitive compensation for skilled workers in regional marketplaces. They are clear indications of differences in wages given to workers in various regions according to the cost of labor in those areas.
Let’s imagine you don’t want to adapt to decreased labor costs because you want to dominate your market. Because they are providing the same value to the organization, an employee in San Francisco would be paid the same as one in Atlanta in that instance. An illustration of compensation based on a national premium would be this.
The alternative is to pay according to headquarters, with remote workers receiving a premium or a discount based on their location. This group includes the majority of pre-IPO businesses with modest HR departments or a mix of in-office and remote workers.
Consider how you will communicate your plan to employees based on their location, regardless of whether you are paying a local or national average. It’s a sophisticated activity to make sure staff members comprehend the reasoning behind your decisions.
7. Adjust for pay ranges
Pay ranges support an organization’s growth and expansion while maintaining consistency, fairness, and competitiveness. One of the greatest methods for establishing pay ranges is to choose the center ground rather than a wide range or the other extreme, which is a single goal.
Pay ranges that are connected to level and grouping based on your competitive market benchmark and job family, a collection of roles in the same functional area that have the same fundamental knowledge, skills, and background requirements, are considered to be in the middle ground. Pay ranges are calculated using leveling and your competitive benchmark.
This strategy has the advantages of tighter internal equity ranges, more budgetary flexibility, and the capacity to swiftly add new functions without requiring the creation of a brand-new pay range for the company.
Looking Ahead
The way that employers pay their employees has to change. The traditional method of equity compensation no longer works.
Data, artificial intelligence, and personalization are now key.
Companies are treating their staff differently as a result of factors like wellness, flexible work schedules, and long-term incentives.
It will be easier for businesses to hire and retain quality employees if they stay abreast of financial trends and developments in the job market.
