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Pay without Borders – Aligning salary with talent





Posted by Sarah Lardner on 30 June 2022

Pay without Borders – Aligning salary with talent

Pay framework | Talent

The global pandemic has made an indelible impression on working practices and policy and everyone’s eyes have been opened to the possibilities of remote working. Where companies adopting agile working policies were able to differentiate from others pre-Covid, now everyone has been forced down a similar route and that point of difference has seemingly vanished. So how can companies attract, hire and retain talent in the current climate?

The past couple of years have presented a new opportunity to hire from anywhere. Companies who used to have a London hub might now choose to hire regionally, or even internationally, opening themselves up to a different array of talent. How they pay them is often the tricky part. 

Benchmarking and analysis
Up until now, pay benchmarking has been inherently regional by nature. When it comes to the cost of living, there may be little difference between Brighton and Nottingham, but there is a huge difference between Brighton and Singapore, or between Nottingham and Calcutta. 

If you want to adjust for the cost of living, should you base your maths purely on geography or on skills and value-added too? How can you be equitable in making decisions on pay? 

The truth is that there cannot be a single solution and there are multiple approaches. For some companies, location is a key factor and pay is aligned to local cost of living, while for others the notion of a regional allowance is removed and instead pay can be aligned nationally or to a central city hub. Some companies are asking employees to live in or around the primary office location in order to retain their full salary, while others – such as the big tech firms – are taking counter measures and instigating pay cuts for those choosing to work from home. Finally, taking location completely out of the equation, many companies are still paying for skills and value add over location.

The first step is knowing your numbers and understanding what the market is doing, while also appreciating that the market can move all the time. Only proper pay benchmarking - with the right data analysed by professionals - will allow a strong foundation for decision-making geared to your business and your people.

One company might differentiate on base pay, another on total remuneration. One might focus on benefits and the entire value proposition because they can't compete with throwing money at base pay, while another has an injection of money that allows them to pay whatever it takes to hire the software engineers they need. Everyone has a different need at a certain time, which is where Innecto helps in understanding the data: how to apply it, what it means for the business and what the knock-on effects are.

Hold your nerve and look at the Total Reward Package
We talked with our clients a lot last year about holding their nerve. Analysis of a 20-year period shows peaks and troughs in pay. After a recession there is a peak, and then a drop but if you look at the straight-line effect over the same period, salaries didn't grow in line with inflation. So we’re advising our clients to tread carefully with inflated salaries. If everything is based around salary - and benchmarks vary from sector to sector - employees can easily hold employers to ransom for a pay increase, only to return soon after because someone else is earning more.

There is a premium on certain roles where supply and demand come into play – and skills are now more transferable across sectors than they were - but we're already starting to see the likes of Facebook and Google hold back on recruitment.

Now more than ever, companies should also be thinking about their total reward picture, not just remuneration. Could granting certain benefits – health insurance, gym membership, wellness days, holiday flexibility or pension - be cheaper than a 3-5% rise in base pay, and the knock-on effect it might create in expectation? At the same time, could a more flexible approach to benefits enable you to stay competitive and remain attractive across ages and salary bands? One twenty or thirtysomething looking to get on the property ladder might turn down health insurance or sell back holiday in favour of a higher base salary, while another might opt for less salary in favour of more holiday to travel. Equally one older employee might look to maximise salary to top up the pension before retirement, while another might prefer holiday to see grandchildren.

Culture and Communication
Building a broader package of benefits to complement pay can help reduce pay compression and at the same time create important cultural touch points with a greater number of employees. Reward and recognition schemes that really strike a chord are also usually part of a longer-term strategy, and typically hinge on communication.

One of my former employers, Nationwide, were totally transparent in how they communicated. Essentially, they said: “We are never going to pay what the banks pay. We are paying median against the market and that is our pay stance. We're based in Swindon, in Northampton, not London, and we've got a nicer working environment. Choose where you want to go”. That clarity of message, combined with the offer of job security that many of the banks could not provide, was enough for most people. Currently, inflation is high and we may be heading into the kind of economic climate that younger employees have never experienced. For them, that puts even greater emphasis on the importance of getting your messaging and communication right. If it’s done well, it can inform and educate but also reassure and retain.

In the current climate everything is constantly flexing and evolving. In response, you need to be looking at your numbers and reappraising all the time against the culture of your business and how you’re communicating. Be considered in how you position yourself and your narrative. If you’re doing that, and you have happy and engaged employees, there’s no reason why you can’t hold your nerve, ride this out and keep your options open.

Read Sarah’s White Paper: Borderless – Talent and Salary Alignment

More recent Insights by Sarah Lardner:

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How organisations are aligning their digital strategy with their people strategy
What are the key factors affecting executive pay strategies in 2022?

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