2023 is the year of HR.
With a raging talent market, record inflation, wildly oscillating market, rapidly changing legislation, and tight-fisted investors, businesses have a high bar to climb in 2023.
Companies will need to get super creative to keep retention and performance high, while driving down costs. HR will be at the center of it all. To help HR leaders prepare, we’re sharing four trends to expect in 2023 as well as tips for how to take action today.
Prediction #1: Improving compensation IQ will be the most in-demand skill training by managers and employees.
Talking about salaries is no longer taboo but necessary with the latest generation of workers, especially as employers are increasingly required to post salary bands in job postings. While compensation information has never been so accessible, all stakeholders — investors, CEOs, heads of HR, people managers, employees, and candidates — need to become more educated on the components and nuances of pay in order to have meaningful conversations that bolster hiring, performance, and retention.
In response to pressure from employees, investors, and legislation, employers will collect more compensation data about their market, company peers, and roles to ensure clarity at every decision about hiring, pay adjustment, and promotion.
To keep pace, managers and recruiters will demand training on how to discuss compensation packages with their teams — not just about base salary, but also stock options and benefits — so they can explain how compensation is determined to build trust. Candidates and employees will also acquire more information to evaluate roles and employers, and they will seek better tools and training to educate themselves on market rates and their own skills to evaluate offers and upward mobility.
Why this matters
“If you don't have a clear message, a clear strategy, or an understanding of how you built your organization and how you're going to support your employees, you're going to struggle,” said Thanh Nguyen, OpenComp co-founder and CEO.
That struggle includes losing in retention and recruitment. A recent survey found that 68% of employees would switch to a more transparent employer — even for the same pay. And 33% of job seekers said they wouldn’t even go to a job interview without seeing the salary first.
It’s also important for companies to go beyond the bare minimum, as some New York City employers recently discovered when they got called out for sharing salary ranges as wide as $300K to comply with the city’s recently enacted legislation that requires salary information with all job postings.
Noncompliance also has serious financial implications because there are hefty fines attached to these laws. In California, employers could face up to $100K for every 10 noncompliant job postings. And in New York City, fees can balloon upwards of $250K per violation. Failure to take action could get costly for organizations very quickly.
How to take action
Compensation planning can no longer be an afterthought. It’s not just about getting it done, it’s about doing it right from the beginning because it sets the foundation for transparency and compensation IQ.
Here are three important steps to take:
- Create appropriate salary bands for your organization, which involves much more than adding a maximum and minimum spread to market data.
- Educate managers and employees about compensation, including:
- Conduct a pay equity analysis or audit. It's also important for companies to assess where their current employees fall within any newly established ranges. If you spot inequities, make those adjustments quickly.
Prediction #2: Economic uncertainty will make bonuses, alternative perks, and L&D more popular.
Merit increases can’t keep up with inflation, so employers will turn to creative alternatives to attract and retain employees, such as spot bonuses, four-day work weeks, or placing further emphasis on their company’s social impact or mission.
Whether it’s a signing or one-time retention bonus, employers will aim to grant some additional compensation even if they can’t budget for 5% or more annual increases (which doesn’t even keep up with inflation). Flexibility in the form of fully remote work or a four-day workweek will continue to attract candidates who increasingly reject hybrid environments known to create inequities and who increasingly base their personal identities on nonwork components of their lives. Gen Z and Millennial talent in particular want to be trained and upskilled, so learning and development will take off as an added benefit if an employer can’t be as competitive on pay.
Why it matters
Attrition is costly. Every employee who quits costs companies about one-third of a worker’s salary, according to the World of Work’s 2022 Retention Report. That’s $25K for every worker making $75K.
And according to Hired’s recent report, 57% of tech workers say they plan on looking for new jobs. Meanwhile, it takes an average of 60 days to fill an open role. That might even be an enviable position for some companies who aren’t able to backfill roles, creating a heavier workload and loss of morale for employees who stay.
How to take action
“During uncertain economic times, you really want to do whatever you can to retain and develop your top performers,” said Nancy Connery, OpenComp co-founder and principal of Connery Consulting. “Anything that adds to the quality of your employees’ lives within your company’s financial constraints is a win-win.”
As you develop alternative perks, work-life balance and stress are important things to prioritize. Consider these facts:
- 70% of workers say they’d take work-life balance over higher pay, says a survey by FlexJobs.
- Stress among the world’s workers is higher today than it was in 2020, the previous all-time high, according to Gallup.
Whether it’s stipends for alternative health care or meal delivery, there's a lot of creative things you can offer that speaks to the evolution of the workplace.
Prediction #3: Employers will feel the effects of Dobbs.
Not only do employees want to work for companies whose values align with their own, but the very real consequences of the Dobbs decision that overturned Roe v. Wade will impact employers’ abilities to hire and retain talent — especially people who can become pregnant. What’s more, since the majority of people get their health insurance via their employer, or that of a family member, employers will experience more pressure to assess their health benefits and provider plans.
Employers operating in states with more restrictive abortion laws will have trouble hiring and retaining talent and will need to double down on mental health and reproductive health benefits to help employees access necessary care and medication, though they do need to be aware of potential legal concerns as states consider criminal penalties for those who aid or abet someone who gets an abortion by crossing state lines.
We will also see more birthing people leave the workforce, exacerbating the exodus already seen during the pandemic and accelerating the loss of decades of progress as they are denied birth control, forced to give birth, or die during childbirth. Research predicts that a total abortion ban would increase to total maternal deaths in the U.S. by 21%, and an equitable 33% increase for Black birthing people. Public health issues are workplace issues, and employers will need to play a larger role in providing sick days, PTO, and access to care.
Why this matters
It's safe to say abortion rights weren’t top of mind for employers at the start of 2022. “When the Dobbs ruling first came down in June, employers might have asked themselves, ‘What does overturning Roe v. Wade have to do with us? It's not really a workplace issue.’ And I think they've stood corrected pretty quickly,” said Emily Sweet, OpenComp’s VP of social impact.
According to the Guttmacher Institute, a leading reproductive health research group:
- 1 in 4 women will have an abortion by age 45, and many more women have suffered miscarriages that often require therapeutic abortion to protect their health.
- There are 40 million women of reproductive age and 56% live in states that have moved to severely cut access to abortion care.
- Even before the Dobbs decision, 1 in 10 women traveled out of state for an abortion.
“So we know from the get-go that this is an issue that has and will continue to impact your people. So HR leaders need to really understand that,” said Sweet.
How to take action
If you haven’t already, review your current reproductive health care offerings. Things like relocation benefits, travel reimbursements, and extra paid time off can go a long way in supporting employees.
It’s also important to be mindful of privacy and to stay abreast of the shifting legal landscape and ramifications. We expect this issue will evolve as more states will pass restrictions in the coming year.
For more guidance on developing and implementing reproductive health care benefits, download the Pro Repo Playbook from our partners at Gender IDEAL.
Prediction #4: VCs and boards will demand progress toward pay parity among their portfolio companies.
While we’re seeing states like California mandate that companies report their pay data by sex, race, and ethnicity to encourage more equitable pay, VCs and board members will outright require that portfolio companies set time-based targets and report progress on pay parity.
Investors know that equitable companies perform better: they’re more likely to beat competitors, win new markets, and retain employees. With VCs needing to be choosier about who they fund in the midst of economic uncertainty, startups will need to not only report their pay data to VCs and board members, but also rectify any gaps in order to land funding.
Why this matters
When VCs invest in companies, they’re really investing in the founders, many of whom don’t have deep experience in workforce scaling.
“These pay laws are about protecting and helping humans in a way that is progressive to our communities,” said Nguyen. “When you layer on what you have to do and be accountable for as an investor, it's all tied together. I think we have to help leaders figure this out and comply with the rules and regulations.”
Founders need guidance on compensation planning, the importance of getting it right, and the legal consequences of getting it wrong.
How to take action
This trend is about responsibility and measurement. Central to that are regular pay equity audits across an organization.
“This really is one of the most important steps that companies can take to address pay inequity,” said Sweet. “We always say you can't manage what you don't measure. While it’s easy to keep putting this type of work off, when you identify gaps early, and of course, correct them in real time, companies can save themselves a lot of pain and money in the long run.”
Unfortunately, we know that very few organizations conduct regular pay equity audits, and when they do, they rarely look at multiple factors like race and ethnicity, gender, education, and years of experience.
To do this work, look at your company overall, as well as by job levels, specific roles, and departments to see if there are obvious areas of discrepancy. And if you’ve recently established salary bands, review where your employees fall within those bands. If you spot an inequity, make the pay adjustment as soon as possible.
“This is something ideally companies do on a regular and quarterly basis because every new hire or employee exit shifts this balance,” said Sweet.
Work plays a different role in our lives today because of social movements, laws, technology, and the access to information that technology allows.
“Employees want something different in the future,” said Nguyen. “They want more ethics and more accountability from their employers. All this great technology and opportunity has advanced the employee and I think that's amazing. That's where we want to go.”
- High Growth Matters Podcast: 2023 Trend Watch: 4 Chances Every HR Professional Needs to Plan For
- On-demand webinar: 2023 Trend Watch: The 4 Changes Every HR Leader Needs to Plan For
- Resource: Pay Transparency Legislation Tracker
- eBook: An HR Leader’s Guide to Retention in 2023
- Article: Pay Bands vs. Market Data: What’s the difference?