The Indian job market has experienced significant fluctuations in hiring, compensation, and employee trends over the past few years. From aggressive hiring during the pandemic at competitive salaries to the recent cooling of the job market, employers and hiring managers across industries have had to adapt to rapidly changing external environments.
Going ahead, one can expect these disruptions to become the norm. However, organisations have one arsenal that can help them tide through these shifts: a compelling compensation package that attracts talent all year round.
Let’s take a closer look at what constitutes an attractive compensation package and how you can build one to attract top tech talent in today’s unpredictable job market.
Compensation’s prevailing importance in attracting and retaining talent
Compensation has always been a top driver for talent to explore new work opportunities. While the modern workforce values workplace flexibility, learning opportunities and work-life balance, salary continues to be among the top priorities that candidates consider when looking for a new job.
Surveys demonstrate that salary continues to be an important, if not the most important, aspect of a job. While this preference may vary slightly depending on individual priorities and career stage, these findings show that employers cannot offer add-on benefits at the cost of competitive compensation.
So, while providing a full array of employee benefits to attract talent is vital, they must be centred around an attractive compensation plan. This is particularly relevant for Indian employers, as 7 in 10 Indian professionals feel they are underpaid, according to a recent study.
The making and benefits of a complete compensation package
Organisations are free to design compensation packages per their needs, but the nature of certain elements remains the same. The base salary is the fixed wages that an employee receives regularly, whereas bonuses include additional payments on achieving specific performance goals or sign-on, retention, referral, or relocation bonuses.
Similarly, benefits include health insurance, time off and wellness programs, LTAs, and housing allowance, whereas additional perks can be flexible work arrangements, access to company-paid transportation and company-sponsored events.
Many organisations also have a profit-sharing program, wherein employees receive a percentage of the company’s profits or an equity program that gives employees the opportunity to get stock options as part of compensation or purchase company stock at discounted rates.
Offering this myriad bouquet of compensation elements allows companies to curate the more relevant package for their workforce.
This can have several significant benefits, such as:
Higher talent attraction and retention: A well-structured compensation package sets you apart from competitors, enticing skilled professionals to choose your company over others. It can also lead to higher retention and reduce the costs associated with hiring and training new employees.
Engaged workforce: Adequately compensated employees are more likely to be committed, motivated, and driven to achieve their goals. The right incentives can also make them stakeholders in the company’s success, thereby increasing engagement and productivity.
Strong employer brand: Companies that offer compelling compensation packages act as magnets, as their employer brand and EVP precede their reputation.
Define Your Employee Value Proposition (EVP)Before designing a competitive compensation package, establish clear objectives that define your organisation’s market position and differentiation strategy. These goals will guide the development of a suitable compensation strategy and matrix with well-defined structures.
Decide whether to base compensation on market benchmarks or to create a merit or skill-driven plan. Consider if you want to share company profits or offer equity to align individual interests with company success.
Gathering Comprehensive Data for Informed Compensation DecisionsConduct thorough analyses to collect data on responsibilities, skills, qualifications, performance, and benefits for comparable roles within your industry and region. Use salary surveys, public databases, government reports, and insights from reputable industry experts.
Benchmarking will help you understand compensation trends, competitor practices, and industry-specific benefits. For example, the fixed and variable pay ratio varies significantly between the healthcare and tech industries, making it essential to consider market conditions for a relevant and competitive compensation strategy.
Establish Compensation Structures and Link to KPIsUtilise foundational data to develop pay structures and levels across various functions and roles. Break down these structures to reflect compensation elements and their alignment with Key Performance Indicators (KPIs) for each role.
Ensure the matrix is straightforward, as transparency sets clear expectations and promotes fairness. Incorporate variable pay, incentives, benefits, and other perks according to salary budgets, company culture, and organisational goals. Ensure compliance with legal standards and promote equity by rewarding equal pay for work of equal value.
Incorporate Flexibility and PersonalizationA diverse, multi-generational workforce has varying expectations and demands. Design compensation strategies that offer flexibility and personalization, allowing employees greater autonomy and control. Include components such as flexible work locations or hours, access to learning and development opportunities, wellness programs, and customizable insurance options.
This approach enhances engagement and motivates employees to perform at their best. Additionally, offer non-financial rewards like recognition programs, mentoring opportunities, and social impact benefits, such as volunteering or matching donations.
Measure Employee Satisfaction and Continuously AdaptRegularly seek employee feedback to understand their compensation preferences and measure satisfaction. Keeping abreast of workforce needs and their evolution enables timely updates to compensation plans.
Use surveys, exit interviews, off-site activities, and town halls to gather relevant data. Adapting to technological, talent, and business disruptions requires a fresh approach to attracting talent. By continually revamping your compensation plan, you can strengthen your market position and attract top talent.
Learn How to Design a Competitive Compensation Package with Aon’s Expert Guidance