This year is shaping up to be one of the most challenging in history for employers thanks to the highest inflation rate in four decades and a growing imbalance between the number of job openings and the number of candidates willing to fill them. Pressure has increased across all industries to raise salaries and hourly wages, but that simply won’t be enough for many companies. Instead, employers must come up with creative ways to compensate high-value employees as well as attract new talent. Luckily, there are several ways employers can do this through strategic compensation strategies.
Non-cash benefits: Candidates want to feel valued and supported by their employers. An increase in wellness benefits, corporate social responsibility initiatives, maternity/paternity support opportunities and professional/personal growth opportunities are solid compensation strategies.
Using life insurance to reward key executives: For business owners, their key executives are an important factor behind a business’s success. Rewarding key employees with an executive bonus arrangement using life insurance, which primarily provides death benefit protection, may be an effective way to ensure that top performers stay with the company and don’t turn to a competitor.
Performance-based compensation packages: Traditional compensation bands consist of stock and equity. Equity can include grants of stock, stock options or restricted stock units (RSU). The compensation of top executives is increasingly tied to achieving results across all industries.
Compensation packages that appeal to investors: When attempting to attract talent, employers are also mindful of the need to structure compensation packages that sit well with investors, not just employees. Investors will support a compensation package for executives that is directly related to the performance of that company.
Incentive programs that increase retention: Incentive programs can be based on both short-term and long-term performance goals. Companies can provide cash and stock-based equity grants that will grant additional RSUs upon certain levels of achievement. They are forward-looking.
Creative comp packages at private companies: Because equity in a private company cannot be realized in terms of translatable cash until there is an event such as an IPO, privately and publicly held companies differ in their compensation strategies. Private companies are increasingly realizing the need to find creative ways to compensate talent that does not put them at a disadvantage to publicly held employers. It’s common to see greater promises of equity in addition to higher cash compensation than in the past so that a private company can compete with a publicly held company for the best talent.
Goals-based vacation packages: An all-expenses-paid or all-inclusive vacation for a high-value employee (and a plus one) is a great incentive for that person to meet or beat a goal. The offer of a free experience with paid time off has proven to be extremely motivating.
Executive development: Preparing a team for personal and professional growth is a very strong retention technique for not only current staff retention but the recruiting of new team members as time goes on. Preparing a team to be experts in a particular industry can create ripple effects in an industry and a company’s reputation.
Rewarding high-value and high-producing employees will continue to be an evolving issue that affects employers around the globe as they try to balance the monetary with the intangible. Workplace perks, culture, recognition and appreciation often go farther than any check could, but dollars and cents must always be considered. Executive bonus plans and employee compensation packages can vary from company to company, but they are all rooted in the same purpose: retention, rewards and recognition. If a business owner is looking for options to compensate a few key executives, a conversation with a trusted advisor could unlock more options than they thought possible.
Jake Guttman, FSCP®, is the founder and CEO of Rosevest Financial, which provides a variety of services that include financial, legacy, investment and retirement planning, as well as risk and wealth management.
Securities and advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC.
