Compensation and Benefits Landscape for 2024
In 2024, the landscape of compensation and benefits is poised to undergo significant changes, driven by evolving workforce dynamics, economic conditions, regulatory factors and technology. Employers are expected to continue seeking innovative ways to attract and retain top talent in an increasingly competitive job market.
While most US-based company CEOs were expecting some form of a recession this time last year, we saw something a bit different occur throughout 2023. A resilient economy where the labor market remained strong (although job growth tapered down to a more stable pace and was not as extreme as levels seen in 2021 and 2022). Inflation fell to 3.1% as of November 12-month look back, the economy and stocks grew more than anticipated, real wages grew and wage inequality fell.
Volatile markets make it a lot more difficult to make predictions and thus compensation strategies need more attention than ever, now and in the years ahead. Otherwise, companies will fall behind, making it more challenging to catch up.
As we look toward the future, it is important for organizations to stay abreast of emerging trends affecting the workforce in 2024. There is a diverse mix of rising factors that are reshaping conventional approaches to compensation and benefits.
Total Rewards Focus
This includes the continued focus on total rewards packages that extend beyond traditional salary and healthcare offerings, as explained in our previous article “Reimagining Total Rewards: A Holistic Approach to Employee Engagement.” Flexible work arrangements, professional development opportunities, and wellbeing programs are all expected to play a greater role in shaping employee compensation plans. Employee well-being has emerged as a critical consideration for organizations in recent years. In 2024, there will be an increased focus on holistic well-being, encompassing physical, mental, and financial health. Organizations may invest in comprehensive wellness programs, mental health support initiatives, and work-life balance strategies. Financial wellness benefits, such as financial planning assistance, student loan repayment programs, and retirement planning tools, may also become more prevalent.
Total rewards play a crucial role in attracting and retaining talent across all levels within an organization, from entry-level positions to C-suite positions. Young professionals entering the workforce often prioritize growth and development opportunities, as well as competitive pay and benefits. Mid-level professionals seek a mix of financial rewards, benefits, career advancement opportunities, and a positive work environment. While executive roles often value additional perks, such as equity-based compensation, stock options, and retirement plans.
Total rewards planning is not a one-size-fits all approach and should be adaptable to the changing needs of the multi-generational workforce. Communication with employees will be key in learning what matters most to them so organizations can customize total rewards plans accordingly to boost retention.
As we have seen in 2023, pay equity and transparency will continue to be a growing focus. Employers must be proactive in identifying gaps to ensure fair, equitable compensation and in turn promote a culture of transparency as well as compliance with any applicable pay transparency laws. As a way to appease state legislative mandates, some companies are providing unrealistically large salary ranges for jobs. And as a result of these new transparency laws, we are now seeing instances where employers are now competing for better starting pay and other benefits rather than focusing on attracting better talent. This will likely create more of a headache for both employers and employees during the recruitment and negotiating process.
Permanence of Remote Work
Additionally, as remote work becomes more prevalent, employers will need to continue to adapt their compensation strategies and be prepared to offer flexible work arrangements. Furthermore, a more diverse and multi-generational workforce will require tailored benefits packages to meet varying needs and preferences. These flexible working models will become more prevalent in 2024. Consequently, organizations may reevaluate their compensation structures to accommodate remote work, such as offering location-based pay adjustments or remote work allowances. Additionally, organizations will need to find new ways to ensure engagement and connection among remote employees while still effectively delivering benefits.
The ongoing impact of technology and globalization is likely to exert influence on compensation and benefits practices. The rapid advancement of technology will have a profound impact on compensation and benefits management. Automation, artificial intelligence, and data analytics will streamline processes, enabling organizations to gain deeper insights into their workforce and make informed decisions about rewards allocation. The digitization of compensation systems will also offer greater transparency and flexibility in managing and communicating benefits to employees. It’s too early to gauge its impact, but one thing is certain, AI is no longer a concept for the future but a powerful technology already making its mark.
In light of these changes, organizations should place a premium on market research and benchmarking to ensure that their compensation and benefits offerings remain competitive and aligned with industry standards. This will be essential in not only attracting top talent but also in maintaining employee satisfaction and engagement.
The compensation and benefits landscape is expected to undergo transformative changes driven by internal and external factors. By staying proactive and adaptable, organizations can position themselves to effectively navigate these shifts and remain competitive in the talent marketplace. NFPCC is here to assist you in navigating your compensation and workforce challenges, don’t hesitate to contact our consultants for expert advice.