7 Things To Look For in a Compensation Package
In today's job market that’s been bleeding employees, workers can afford to be a little picky. Here's what to look for in a compensation package.
Today’s job seekers are spoiled for choice in a job market that’s been bleeding employees for the past year. Quite the hot commodity, workers can afford to be a little picky and a little particular about what kind of compensation package they’d like in exchange for their labor.
With companies competing for workers, savvy job seekers know exactly what they’re looking for in their compensation packages.
What are the top things job seekers look for in a compensation package?
As a job seeker, the first thing to understand is what makes a compensation package competitive against those of others in the industry. An apples-to-apples approach, or as close as you can get to that, is generally best when determining comparable value.
Beyond the dollar amount that’s being offered to the candidate, a compensation package can include:
While this includes salary and wages, it also takes into consideration other methods of payment that could significantly bolster your annual take-home pay, such as commissions, contract payments, and salary increases (more on these later).
How often does the company issue bonuses and how would you qualify for them? These can include holiday, referral, yearly, retention, signing, relocation, or performance bonuses, to name a few.
3. Savings plans
These can add significant value to a compensation package, though their impacts are more long-term. Savings plans could look like pensions, stock options, profit-sharing, or 401(k)s.
4. Insurance coverage
Depending on where you live, this could be a big one for you. Recent data shows that in the US, roughly half of Americans received health care from their employers. Insurance isn’t just limited to health care, though. It can also include life insurance, hazard pay, disability, medical leave, and parental leave.
This relates to flexibility and autonomy in regards to how you spend your time. This can inform what your day-to-day will look like while working with the company. Keep an eye out for options around working from home versus in office, hybrid schedules, flexible work hours, unusual work hours, or schedule coordination across time zones.
6. Time off
A recent trend that we’ve been seeing is companies offering unlimited paid time off to employees. It’s meant to boost employee morale and reduce burnout, which ultimately leads to better productivity. Additionally, it’s overwhelmingly popular amongst workers. Time-off benefits can look like vacation days, sick days, mental health days, designated time for volunteer work, or company retreats.
7. Employee support services
“Employee support” is an umbrella term that basically encompasses all of the fun extras that companies can think to offer employees. While these may not be deal-breakers for job candidates, they certainly help to sweeten the deal. Services can include unlimited snacks and drinks, a game room, gym access or membership reimbursement, child care services, transportation or parking vouchers, tuition reimbursement, or professional training and development.
While it’s not always easy to comparison shop compensation packages, many companies will list the perks and benefits they offer to employees on job listings, in press releases, or on their website. It’s a strong competitive advantage to offer a good package, so company’s that are particularly proud of theirs will typically want to get the word out to attract better qualified applicants. If compensation data is hard to come by, that may tell you all you need to know.
Also, it’s important to understand which benefits are important to you. For example, if you’re not planning on having kids any time soon, parental leave probably won’t be very meaningful to you. Or, if you really enjoy a flexible schedule, a strict nine-to-five expectation that doesn’t allow for working from home probably won’t be your best option.
5 Questions to ask when evaluating a job offer
You have an offer in your inbox, you’ve noted the above items to look for, and now you are ready evaluate. Let’s go!
1. Is the pay competitive?
Salaries and wages are typically the first things people think about when determining what they want from an employer and what they’re willing to accept in terms of compensation.
Workers want to ensure that they’re being paid adequately and equitably for the work they do, for their level of experience, and their level of education. On top of that, it’s safe to assume that workers would want to be compensated comparably to similar positions in their industry, but that can pose some problems.
For one, a PayScale study found that many employees are unaware of what the going market rate for their position even is. While there are websites that can offer some insights, they largely collect data through polling. There’s a chance of people exaggerating their salaries and wages, and the pay rate as a standalone figure doesn’t tell the whole story in terms of how satisfied an employee is with their position.
Still, “pay to stay” is a real thing. Companies are finding that it can be more economical for them to pay their workers more upfront than it is for them to skimp on pay and risk greater employee attrition. Attrition is nothing if not expensive, and after the Great Recession, we will likely see more businesses considering raising pay as a cost-cutting measure. Case in point, the non-profit healthcare company Providence found that it could save approximately $6 million a year by raising worker pay and reducing attrition.
Beyond that, there are several factors that businesses should consider when determining the pay rate of a new hire. Here’s some insight into what those factors are.
2. How are salary increases determined and how often are they issued?
Understanding the structure of salary increases can help give job seekers a better idea of what their long-term prospects with the company will look like and what kind of pay they can expect in the future. This can be particularly useful, for example, when a candidate is considering taking a lower-paying entry-level position that could potentially become a much higher-paying gig over time. The question then becomes… how much time?
Merit increases v. salary increases
Merit increases are salary increases that reward employees for a job well done. The better an employee performs or the more productive the employee is, the higher their raise will be. The idea is that if an employee brings more value into the company, whether by bringing in revenue or some other means, the employee can receive some of that value back in a direct and tangible way. This empowers employees to take personal responsibility for their output, and it gives them a sense of control over their success with the company.
Salary increases, overall, can refer to any type of raise, including across-the-board raises like annual raises. These increases are less motivational than merit increases, but they may be a good option for organizations that are seeking to maintain a level of consistency amongst job titles. In such cases, an alternative reward system for high-performing employees could be to promote them to a higher-paying position. However, depending on the company’s organizational structure, this may not always be an option.
Seniority v. tenure
Another consideration is seniority versus tenure. While they both relate to how long someone’s been working at a company, seniority is relative and tenure is absolute. For example, an employee’s tenure indicates how long they’ve been with the company, let’s say 10 years. That may sound like a long time, but that employee could have low seniority when compared to their coworkers who have all been there for 15+ years.
Understanding whether or not the raise structure takes things like seniority and tenure into consideration can potentially imply compounding raises over time, which can be a good thing if you’re hoping to grow with a company or a bad thing if you’re looking for higher pay upfront.
3. How much flexibility does the job offer?
It’s no surprise that workers have grown more accustomed to a flexible work schedule after the pandemic’s lockdowns. In May 2021, a survey found that 39% of workers would rather quit their jobs than return to the office with that percentage even higher amongst Millennials and Gen Z. Another survey discovered that 76% of workers wanted more flexibility regarding where they worked (home versus office) and 93% wanted more regarding the times they worked.
You can’t really blame them, either. If something can be done with more flexibility, and with that, added comfort, then why shouldn’t it be? Doing things one way simply because they’ve always been done that way is hard selling point.
When considering a job offer, candidates should consider what’s important to them and what’s required of their lifestyle. Consider how your day-to-day life looks now compared to what it looked like at the start of the pandemic. How has working from home worked for you, for good and for bad?
Once you determine what you’d like your workday to look like, it probably won’t be too hard to find a company to accommodate you. An Upwork survey found that 62% of companies were looking to expand their remote working options either now or in the near future. This is one area where you might not need to compromise too much on your expectations.
4. What other incentives or bonuses can this company offer me?
The added bonuses and perks that come in compensation packages can vary pretty significantly from one company to another, but you tend to find that perks are somewhat consistent or comparable between competing companies.
While these incentives usually won’t make or break an offer, they can sometimes make up the difference between multiple offers. With each employees needs as unique as the employees themselves, as a job seeker, you should consider which perks you need, which you’d really like, and which you simply don’t care about.
For example, something like an on-site daycare center could be non-negotiable for those with small children, but for others, it might not even be a thing they think about.
When reviewing a compensation package, consider which perks you can do without and which ones you were hoping for but don’t see offered. Sometimes (not always!) you have some wiggle room to swap out one perk for another, but keep in mind that all perks are not created equal. The cost of the perk is built into the overall value of the compensation package, so swapping, say, gym reimbursement for tuition reimbursement wouldn’t be feasible for the business.
5. How does the company approach ethics-based decision-making?
Finally, job seekers should consider the ethics and values of the business, which should be baked into the compensation package itself though it probably won’t be explicitly stated. The working world looks much different today than it did just a couple of years ago, and because of that, companies have to rethink their approach to their people.
That’s to say–how does the business make people-centric decisions? Are their decisions primarily data-driven or is their approach more personalized, taking the individual’s talents, needs, and potential profitability into consideration?
It’s easy to understand why businesses might seek to make data-driven decisions using some sort of AI. It eliminates human error and biases, it levels the playing field, and it accounts for several different variables at once. However, there should be a code of ethics associated with the use of AI in organizations.
As a job seeker, don’t be afraid to ask your HR representative how they arrived at the numbers in the compensation package. Ideally, you’d find that the package was determined using a combination of data and thoughtful consideration. Leaning too heavily on one or the other could prove disadvantageous to employees as neither can or should stand on their own. Feelings can be misleading and different HR workers could value some skills higher than others would. Similarly, data can fail to account for the candidate’s more qualitative strengths.