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Compensation for a Multigenerational Workforce

In times of economic uncertainty and heightened retention concerns across all employers, utilizing capital to its highest utility is of the utmost importance. NFPCC has been diligently focused on the strategic use of compensation within client organizations. Specifically, NFPCC has consulted with clients to understand philosophical and psychological differences amongst their respective workforces. Within the U.S. workforce today, four different generations with varying thoughts and sensitivities surrounding compensation have converged, leading companies to adjust their respective compensation programs. However, without understanding what these thoughts and sensitives are for your specific workforce, adapting certain compensation actions may miss the mark of a successful strategy. As such, NFPCC has researched the utility of compensation programs within each respective generation in the workforce today.

Baby Boomers (1946-1964) Age 57-75 | Focus: Retirement Entry

Baby Boomers were born during times of war and economic uncertainty, with parents that lived through the great depression. Over their respective lifetimes­­, Baby Boomers were taught to judiciously save and invest in their 401(k) plans. 401(k) plans were conceived as a way to 1) provide economic stimulus to the US stock exchanges, and 2) provide a method of saving. However, Baby Boomers are currently entering retirement or will do so within the next 5-10 years. As such, maximizing annual income on a cash basis is attractive due to the lower amount of risk and exposure that deferred compensation and long-term incentive plans provide. Baby Boomers have traditionally had the highest level of employer loyalty and, more likely than not, have looked for higher compensated opportunities over their careers. Based on these factors, Baby Boomers are generally motivated by higher base salary and minimal variable pay.


Generation X, similar to Baby Boomers was also born during times of global turmoil covering the Vietnam and Gulf Wars. This generation has seen their parents work entire careers with one to three employees and were raised on the idea of being loyal to employers while continuing to save personally. However, Gen-Xers have seen their parents experience multiple stock market crashes such as Black Monday, the financial crisis and the oil crash, which wiped out years of diligent saving and sacrifice of daily luxuries. At this point, Gen-Xers are preparing for retirement and are thinking differently than their parents in that, while daily cash is important, hitting the last home run to secure a comfortable retirement is front of mind. As such, Gen-Xers are experiencing mid-late career job-hopping chasing the last (hopefully) hurrah. Specifically, large incentive pay and sharing of company success are paramount.


Generation Y (Millennials) have been the hardest generation to satisfy to date due to subclasses of thought between the top and low ends of the generation. This generation has very differing thoughts on compensation and the value of employer loyalty relative to their parents and grandparents. Millennials are entering the early stages of their careers and are looking to establish their positions in the workforce and are focused on the totality of the value proposition of working in general. This generation has experienced war, economic collapse, corporate greed, hyperinflation and accelerated access to information at a moment’s request, all of which have shaped their views. Specifically, Millennials are focused on job satisfaction, environmental impacts of their companies and what/how there are paid.

Millennials have had the highest turnover rates with an average of 1-3 years with an employer. Short-term gratification via high bonuses and alignment to efforts (via long-term incentive plans) are the most effective ways of satisfaction. However, incentive pay is variable, and 1-2 years of  “underpayment” for what a millennial views as outside factors (not related to individual performance) can accelerate voluntary exits. As such, balancing short-term cash with long-term incentives provide a layer of retention strategies. Yet, the method of how long-term incentives are structured can be both an incentive and a disincentive.


Generation Z is in the infantile stage of their careers where many are entering high school or college with what surely appears to be a difficult perspective for other generations to understand. Generation Z is asking “Why?” Why should we work? Early statistics on Generation Z outline many unrealistic thoughts, such as “pay me for what I may be able to do” versus what I have demonstrated I am capable of. Specifically, pay is being requested in base salary with little to zero interest in variable compensation, which rivals current base salary levels of tenured valuable employees. Based on current trendlines, Generation Z’s retention rates will be unparalleled. However, these statistics are also relatively young and untested over a long period.

As outlined above, each generation within the workforce today views their compensation, and the method in which they are compensated, quite differently. As such, understanding the makeup of your respective workforce is imperative. NFPCC recommends organizations review their workforce and continually ask themselves, “Is the compensation program we are currently employing maximizing the return on the investment we are making into our biggest asset, our people?”.