The struggle to recruit and retain skilled employees is real. A Speakers Corner survey of 500 UK companies found that over 90% are facing “significant challenges” in doing so.
The infamous “war for talent” still rages, despite the so-called Great Resignation being a few years behind us at this point. Employees still expect generous packages and perks, while companies have limited resources in the current economic climate.
In these challenging times, businesses need to get creative with compensation and rewards policies in order to attract and retain the best talent. And finance departments should be seeking collaborative conversations with other departments, so that not only the cost of something is seen, but the long term benefits and payback heard.
This article details how finance and HR teams can come together to find the right mix of salary and other incentives to attract talent.
It’s not all about money
We aren’t just talking about salary when we refer to compensation and rewards strategies. A total compensation package could incorporate things such as creative leave options (think duvet days, holiday purchase schemes, or even unlimited annual leave), or tax efficient incentives such as subsidised work-from-home equipment.
But while there are certainly ways to attract and retain the best in the business without paying top dollar, can you really afford to lose your best talent, or miss out on being able to attract the best in the business, when at least something could have been done?
The key to a successful (and balance sheet-friendly) compensation & rewards strategy is to work with your HR team at every stage, to ensure that any policies they propose are aligned with the company’s financial goals.
How Finance contributes to a winning rewards strategy
HR should be the ones putting forward initiatives to retain staff. But Finance owns the budget. You should be closely involved as the strategy evolves, assessing reports on the financial metrics by which HR’s success will be judged.
For example, what percentage of new hires are agreeing to the advertised salary or signing on below budget, versus negotiating a higher package? Are the people hired under each initiative higher performing and more motivated?
While the HR team has its own KPIs and strategies, it likely won’t be expert in translating these to financial performance. Which is where they will lean on Finance for support.
The aim is to balance competitive pay with financial sustainability, while maintaining a happy, fulfilled team. And of course, to keep the company’s financial future secure thanks to well-built compensation frameworks.
How HR leads the way
Whilst the final signoff must always come from the budget holders, HR owns the formation of a compensation plan. Its successful rollout will see the department sew up several of its major objectives at once. Namely, improving staff wellbeing, performance and retention, contributing towards target-hitting recruitment drives, and driving down the costs of training and developing new hires.
The connection between these objectives and those of the Finance department should be clear. In other words, if HR succeeds in them, the positive financial impact will flow naturally. Both HR and Finance goals should align with the company priorities of fostering a happy workforce, a solid and growing bottom line, plus a healthy pipeline of the best talent to call upon as you scale.
Making it happen
Research, analyse, stay competitive and attractive whilst adhering to budget constraints. Here are several fundamental steps to take as part of creating your collaborative rewards strategy.
1. Identify key business needs
A rewards strategy is no good if it isn’t aligned with the roles you’re looking to recruit for over the next 12-18 months.
For example, it may be that sales are struggling, and you need to recruit either sales development representatives or more experienced salespeople. Think about how you can create attractive commission or bonus structures, and how these need to be budgeted for.
If you’re looking for a renewed strategic vision for the business, or a corporate restructure, then it’s likely that you'll recruit roles that require more travel into a physical office. So perhaps allocating some budget towards commuting costs, a Cycle to Work scheme, or other travel incentives would be appropriate for luring in the brightest talent. Even freeing up some funds for fresh fruit or Friday beer deliveries could get the right amount of face-to-face collaboration going to help achieve your goals.
And if your new roles will be mostly remote or home based, consider weighting the budget on the side of home working equipment contributions (laptop stands, monitors, ergonomic keyboards, stand up desks etc.). This can help make new hires (and old ones) feel confident that they have the best remote working setup in the business.
2. Do your market research
With a good idea of the budget needed for the year ahead’s hiring (and pay rises, benefits, bonuses etc.), make time to assess what the competition is offering for similar roles. In the ongoing war for talent, with businesses struggling significantly to recruit and retain, it’s essential to be aware of what your competitors’ compensation and benefits packages look like.
You may be able to price in an above-market rate base, or offset a lower base with more affordable (and enticing) benefits such as paid-for training days, subsidised gym memberships and greater annual leave allowances. It all comes down to weighing up the landscape and getting creative.
3. Align finances with values and culture
A great place to get closer to HR is over a core People metric - culture. It’s important that you’re living your core company values throughout the entirety of the business. This includes keeping existing staff happy, healthy and productive, and effectively promoting your culture to newcomers.
Workplace culture has been shown to play a huge part in attracting the top talent. With nearly three-quarters of professionals having left a job because of a poor cultural fit, ensuring that you align the person with the culture is essential for driving down the cost of repeatedly having to re-hire.
4. Allocate budget intelligently
HR may take your budget and decide how best to allocate it across a compensation and rewards strategy, but you’ll need to fine tune the numbers and percentages alongside them.
Ask yourself if, say, 80% of the budget going on base salary means that 20% would be better allocated to bonuses, or split into four portions of 5% for other benefits such as travel perks, fitness contributions, or a weekly food allowance.
Sit down with HR and ask how these various initiatives will support your financial goals in terms of mid- to long-term payback, and how they will impact upon the bottom line.
5. Get buy-in
Achieving buy-in for your plans from existing staff will only serve to improve wellbeing and productivity, as well as to reduce churn rates. Think of it as ‘rewarding by consent’.
A happy workforce tends to be a profitable one.
Don’t rest on your laurels
Finance leaders should be constantly evaluating the success of the combined strategy in terms of how it contributes towards the financial wellbeing of the company.
It doesn’t make sense to make too frequent, reactive changes - success requires a consistent approach. But you’ll need to ensure that the plan is up to date and relevant against the competition.
Plan in annual reviews, with a higher frequency in fast moving industries and markets.
Bring Finance & HR together
Finance and HR teams need to work hand in hand, particularly around compensation schemes and salaries. HR are the experts in human needs and attracting the absolute best talent, while Finance has the data and analytical skills to evaluate successful strategies.
It requires close real intent and constant revisions to keep your teams fulfilled and happy. And that starts with close collaboration between these two teams. Without this, you may lose out on great people, and put your financial situation at risk.
About the author
Rebecca Russell is PayFit’s in-house payroll expert, advising businesses on complex issues surrounding payroll legislation, administration and strategy. Having gained over 10 years’ experience in payroll, both within payroll bureaus and in-house, Rebecca now brings her expertise both in payroll and software to PayFit and its customers.
PayFit has helped thousands of Finance and HR teams collaborate more effectively, with powerful reporting capabilities that give leaders the key insights on how compensation of all varieties is impacting upon the business.
