Getting Creative with Compensation When Salaries are Skyrocketing
In a world where, according to USA Today graduates are expecting to walk out of college and into $100,000+ a year role, where gas prices have rollercoastered, basic necessities have risen by around 5%, and the hiring market has seen more competition for candidates than the pandemic saw competition for toilet paper (lest we forget); things are more than a little crazy.
Hiring is difficult. Finding the right person for the right seat, at the right price is a major challenge, not to mention keeping your current teams together when the lure of a higher salary is tempting them to look at their options.
In March 2022 4.53 million people left their jobs *US Bureau of Labor Statistics, and when roughly 33% of people quit a new role within the first year, 25% of people leaving in the first 180 days and 20% of people leaving in the first 90 days. The cost of a bad hire is around 30-40% of the employee’s yearly salary. If that graduate leaves in the first year than that could be around $15,000; that’s a big risk.
But you’re after top performers; A-Players, the difference makers, proven achievers. Hiring a top performer can make a profound difference to your organization. As much as bad hire can affect your bottom line negatively a top performer can significantly increase the productivity, quality, and attractiveness of your organization (top performers attract other top performers). That’s not even accounting for the impact on culture.
According to this Vision Spark article
- Top performers among management and professional workers produce 48% more than average workers. When you translate that to costs, it would cost you $28,000 a year (or, 48% of an average $60K salary) to hire an average (B-level Player) rather than a top performer (A-level Player).
- If you hire C-level or lower Players (below average performers), it will cost you $57,600/year per employee, based on the same $60K average professional/managerial salary and a 96% lower productivity rate compared to top performers.
- In a small company with just ten managerial/professional positions filled with B-level (average) Players, your annual cost in lost productivity would be $280,000. Over five years, you will have lost $1,400,000 just on those ten average hires. That’s based on a modest estimate both in terms of number of average hires and costs of lost productivity — and it adds up quickly. In reality, most companies have more average hires than this, and once you calculate those costs (plus any noticeably bad hires), the financial impact is staggering.
When only 16% of employees are considered top performers, finding them is one thing, hiring them is another.
So, when salaries are climbing, competition for candidates is high and your best people have greater opportunities to look elsewhere how can you remain competitive and get creative? There is good news.
What if we told you we have heard of top performers who received multiple competing offers and ended up going with a role that offered 20% less salary. What if we told you that we’ve seen candidates that have even taken pay cuts to move? How did those companies secure them, especially in a high salary landscape?
Here are some of the creative compensation related approaches that we’ve seen help get top performers over the finish line.
Sign on bonuses, but wait there’s more
Sign on bonuses is a great way to show your commitment to a candidate and to communicate to them that you believe they ARE valuable to your organization and that they are GOING TO BE valuable to your team. A sign on bonus communicates intention and investment in the candidates. The difference between $5000 now vs $330 a month (after tax) for a year may help the candidate meet an immediate need and to help sweeten their transition into a new role.
But wait, there’s more…
You get half now, half on delivery. This may conjure up images of brown paper envelopes filled with cash, dark glasses, and unsavory deals… Sign on bonuses that include both an up-front bonus and a scheduled 3 month or 6-month bonus that may be tied to performance can also be incredibly helpful to incentivizing candidates. Tying a bonus to an achievable performance investment can be inspiring to both parties.
Performance based monthly bonuses in conjunction with defined career paths can also be highly incentivizing. Career pathing is one of the key components of a successful retention strategy. Bringing this element of that strategy forward into the hiring process can be a great way of helping candidates envision their journey with your company and gives them a set of defined expectations.
Stock options (ESOP’s)
Stock options and equity in the company are offer one of the strongest buy-in factors, especially in executive/c-suite roles. Top performers can chart their growth alongside the company growth and will see a direct correlation with their impact and performance and the company performance and be rewarded for it. Stock options are all about investment and can be a dynamic way for both startups and established organizations to attract top performers who may have been financially unattainable. The sense of ownership (and literal ownership) afforded by stock options fosters loyalty and connection with company leadership, true partnership.
Phantom equity, or as it is sometimes referred to, shadow stock, offers many of the benefits of stock ownership but without any physical ownership in the company. Phantom stock follows the company’s actual stock and pays out accordingly. There are two types of phantom stock, “appreciation only” and full value”. Phantom equity can be offer publicly traded companies the ability to offer their employees a level of buy in and ability to benefit from stock growth but without diluting the actual stock for shareholders.
For more detail on Phantom Equity check out Investopedia’s informative expose here.
Paid Training – Personal Investment Stipend
Investing in you, investing in your career. Investing in everyone’s future. EdAssist shared that 84% of candidates said that a tuition assistance program was an important factor in their decision to join their employer. Tuition assistance can also help with retention. The number one reason for leaving a job is lack of career development. According to the fool.com, “tuition assistance helps keep lifelong learners engaged and committed to their jobs because it broadens their learning and development opportunities.”
Employers can also deduct up to $5250 per employee for tuition reimbursements through qualified Employee Assistance Programs (EAPs). With EAP benefits being tax free that is $5250 that is excluded from an employee’s W-2
Benefits, Incentives, and Investments
We may be talking compensation but not every incentive involves cash. Incentives that branch off from tuition reimbursement while still fostering that sense of learning and development can also be very attractive. For example, there are companies that will offer to buy their employees books, cover gym memberships and support volunteer opportunities.
Some of these benefits are more reflective of the culture the company is building. A-players may be looking for roles with impact yet across the board this sense of impact and relationship is a driving force on a personal level. Companies who can get behind and support what their people believe in can offer a level of attraction to candidates that goes far beyond compensation.
There are other benefits likes flexible working environments (remote vs in-office), the ability to set your own schedule, unlimited PTO (either true unlimited or the ability bank time). Additional benefits like parking subsidies, team events, summer hours etc.
Establishing your company EVP – Possibly the Most Important Step
All these elements are part of a bigger picture that contributes an organization’s Employee Value Proposition (EVP).
According to Dan Romer in his blog on “Can an EVP Earn Top Performers? Yes! It Can” states, Typically, when a company is looking to hire someone new, they list the employee benefits, vacation, holidays, insurance, and more along those lines at the end of a lengthy job description. That’s not your EVP. While those things may be part of what will attract someone to your organization, if you truly want to hire the best of the best, your EVP must be far more than that.
When it comes to securing top talent, it pays to get creative with compensation but where you’ll see the greatest return of ROI is when you put the right person in the right seat; where you can give an A-Player a stage to perform on that is really going to give the greatest opportunity for meaningful impact.
More than recruiters, Titus Talent Strategies are a team of Talent Optimizers who genuinely care about the work we do. We empower companies to put the right people in the right seats through informed, connected strategies that combine data with an empathetic understanding of what makes people tick. We recognize that our partners are investing in us and that results mean more than just people placed in a role. It’s about impact and connection.
Want to start a journey towards building a high performing culture? We can give you a roadmap. It takes less than 10 minutes.