The 4 Trends HR Professionals Should Watch in 2023

2023 will test HR’s role as a strategic business partner. With a raging talent market, surging inflation, wildly oscillating economy, rapidly changing legislative environment, and tight-fisted investment landscape, businesses have a high bar to climb in 2023. They'll need to get super creative to drive higher levels of performance while keeping costs low.

HR will be at the center of it all. Attracting and retaining high performers is a whole new ballgame, and the companies that adapt will have a competitive talent advantage.

So, what does 2023 hold for HR ? Here are the four trends to watch.

Improving compensation IQ will be the most in-demand skill training, driven by pay legislation and pay transparency.

Driven by new pay legislation and rapidly evolving attitudes, the pay transparency movement will continue to pick up steam in 2023. Attracting and retaining high performing candidates will require better communication on the mechanisms driving pay. People at every stage of the employee lifecycle—from candidates to tenured employees—will want more information about how compensation is structured, which will put new pressure on comp data.

Companies that disclose pay information in job postings see a rise in applicants, and those applicants are asking for more information about compensation. These companies also see an increase in questions about pay from their existing employees. When you post salary bands for positions, your existing talent pool sees those job postings. They feel more empowered to question whether their compensation matches up and how performance relates to pay. The quality of your response determines, in their mind, how fair and ethical you are.

Even if your business isn’t currently required to comply with pay legislation, it’s important to prepare to have more open, meaningful conversations about compensation. In my years of operating and leading organizations, I’ve seen several cycles of talent wars. When the labor market is tight, employees’ needs and desires evolve. In this market, interest in pay transparency is one of those shifts.

Employees no longer take it in good faith that pay is equitable. They want employers to show them that they’re being treated fairly. Right now, this trend is most popular in tech, but it will expand to other sectors, especially as new pay legislation passes.

Here’s what you can do to prepare.

Have a clear compensation strategy and message. No matter where an employee is in the process—application, onboarding, or performance review—they should receive a consistent message about how pay is structured.
Pay transparency is about more than just sharing salaries for a specific role. Document your compensation philosophy and salary bands in an easy-to-understand format that you can share with candidates and employees.
Managers and recruiters will be on the front lines of these challenging discussions. Provide them with training on how to discuss compensation—including stock options and benefits—so they can talk about it with confidence and build trust.

Economic uncertainty will make bonuses, alternative perks, and L&D more popular.

Salary budgets are already at an all-time high. SHRM predicts that they’ll grow next year, but salaries will continue to trail inflation. As we face economic uncertainty, companies will have to get creative to boost compensation without adding long-term liabilities to their balance sheets. One-time expenses, like spot bonuses and increased learning and development opportunities, will become more popular in 2023.

Alternative benefits are nothing new of course—many companies offer or have offered perks like in-office meals and onsite yoga. However, those benefits may be financially out of reach or unfeasible due to remote work.

Instead, companies will embrace less costly, but still impactful, alternative benefits.

Flexible work schedules align with the values of candidates who are increasingly basing their identities on things that they do outside of work. They also promote equity by freeing up more time for caregivers.
Interest in upskilling is on the rise—48% of workers say they’d switch jobs if offered skills training opportunities. L&D opportunities will be key, especially for employers that can’t compete on pay.
One-time bonuses and spot bonuses encourage higher performance without impacting the bottom line as much as pay increases and year-end bonuses.

Employers will feel the effects of Dobbs.

If there’s anything we’ve learned in the last few years, it’s that public health issues are workplace issues. If it’s affecting your people, it affects your business. The Supreme Court’s decision to leave abortion legality up to the states will have a very real impact on the labor market. Nearly one-third of job seekers say they won’t look for jobs in states that have banned abortion. Twenty-seven percent of job seekers who live in a restrictive state said they will only apply for jobs in states where abortion is likely to remain legal.

Many companies are already offering alternative benefits, like travel reimbursements and extra paid time off, to support their employees who live in restrictive states. The challenge is maintaining privacy and staying within the confines of the law. HR and legal will need to work hand-in-hand to navigate the changing regulatory landscape.

Here are some other things companies can do in the wake of Dobbs, especially those in restrictive states.

Since many people get their health insurance from employers, they’ll want to examine the benefits package closely. Prepare to highlight any benefits that support family planning.
Employers in states with restrictive laws will need to offer reproductive and mental health benefits that go above and beyond usual offerings to attract and retain candidates.
Ultimately, this is a health and wellness issue, and employees will be paying attention to where their employers stand. At OpenComp, we thought it was important to adopt a formal policy and take stance on abortion rights, so we signed on to the Don’t Ban Equality pledge.

VCs and boards will demand progress toward pay parity from portfolio companies.

States like California already require that companies disclose comp data by sex, race, and ethnicity to encourage equitable compensation. Expect VCs and board members to take it a step further by requiring that portfolio companies set time-based targets and report progress on pay parity.

Aside from the compliance aspect, investors recognize the performance advantage that equitable companies have. Diverse, inclusive companies are more likely to outperform their peers on profitability and innovation. There’s also a significant causal relationship between diversity and engagement and retention. Economic uncertainty is shrinking the pool of investor dollars available, and startups need to be prepared to demonstrate equitable practices so they can compete.

To drive progress, here’s what founders and investors can do.

Start-ups should conduct regular pay audits, analyzing demographics, job levels, departments, and any other factors that may reveal biases or disparities. All depend on good comp data.
As audits reveal disparities, companies need to rectify them, which may be an uncomfortable process. Investigating reliable comp data is key.
When I look at my fellow founders and leaders, many don’t have experience scaling a workforce. VCs and boards can play a critical role in helping leaders navigate new regulation and foster the skills needed to ensure fair compensation while growing their business.

2023 will put the spotlight on strategic HR

These trends reveal just how much the needs and wants of working people are shifting. As budgets tighten and attitudes about compensation evolve, HR will play a critical role in meeting employees’ evolving expectations. The companies that successfully get a hold on pay transparency, inclusion, and addressing the concerns that are top of mind for employees will have an edge as the year unfolds.