It’s a new year, and while no one knows what the future holds, there are key trends that comp teams should be prepared to face. From the challenges of the COVID-19 pandemic to the Great Resignation, the way we work - and the way companies compensate their employees - has changed significantly. 2023 isn’t likely to see any major upheavals (hopefully), but the growth and continuation of shifts that took root during the past three years should be on the forefront of every comp pro’s mind.
1. Continued Wage Growth
While there are a few dissenting opinions, recent data from compensation survey providers WTW and Mercer indicate an annual salary budget increase of 4.3-4.6% for 2023. That’s up from salary budget increases in 2022, and even over mid-year predictions.
This is particularly notable amid our current state of economic uncertainty. The tech layoffs we saw over the last half of 2022 and the steep inflation of the past couple years paint a picture of a labor market that’s trending conservative. Typically, this would indicate a slow-down in wage growth, but that’s just not the case.
Unemployment remains - and is predicted to remain - close to historically low (just 3.7% in November, according to the Bureau of Labor Statistics). Meanwhile, many industries are still working to fill talent gaps and even companies that are fully staffed are working to manage pay compression precipitated by the high wages new hires were commanding during the Great Resignation. Add in the fact that more than half of professionals feel underpaid, according to a recent survey by Robert Half, and you have a recipe for substantial continued wage growth.
2. Remote Work is Here to Stay
Fast Company recently called out the conflict about where work takes place as one of the key things to watch in 2023. Remote work is very much on people’s minds, but the supply of fully remote jobs is insufficient to meet the demand. According to Axios, there’s a 35-point gap between the number of jobseekers who want a remote role (50%) and percentage of fully remote roles available (15%).
That said, remote work is not going anywhere, and will, in fact, continue to grow. A recent survey from Upwork predicts that 36.2 million Americans will work remotely by 2025, and research by Gallup determined that fully remote work arrangements will triple relative to those available in 2019. In addition, Gallup found that 77% of remote-capable employees expected to work remotely all or part of the time going forward.
I’ve written before about the impact of remote work on comp teams. Fully or partially distributed workforces make for compensation challenges, but they’re not insurmountable. 2023 will see executive leadership and compensation teams developing a clearer, well-documented playbook for managing compensation in distributed teams.
3. Need for Better and More Timely Market Data
With wages increasing and remote work becoming the new norm, comp professionals will be asked to provide better market analysis. And the way to do that is by maximizing the use of your or expanding your market data. That could mean going deeper by leveraging more specific cuts, better aligning your job architecture with survey data, or adding surveys for a more complete market view.
These tactics will help bring more nuance and specificity to market pricing, but with the rapidly developing talent market, being able to access and use the most recently available data is critical. Compensation surveys from Radford (Aon), and Comptryx by Mercer are both available on a quarterly or semi-annual basis; Culpepper offers data updates monthly. Comp teams that can effectively consume and use that data will be best positioned to help their companies adapt when the market shifts.
4. Importance of Pay Transparency
Lots of people thought of 2022 as the year of pay transparency, but I anticipate we’ll see the trend really come into its own in 2023. For starters, key legislation requiring upfront pay ranges for posted positions became effective in California and Washington as of January 1st. And, most recently, New York state passed legislation that will go into effect September 17, 2023 (NYC already had a pay transparency requirement in place). As of writing this, other states including Massachusetts and South Carolina have similar legislation pending, and many other jurisdictions have pay transparency legislation that stops somewhat short of requiring upfront salary range disclosure. (View a full list of applicable laws from HR Dive.)
In 2023, we’ll hit the real inflection point in pay transparency. A plurality, if not a majority, of the workforce live and work in jurisdictions that have or will soon have pay transparency statutes in place. And the success of these measures are likely to drive further changes to support pay equity. This means that comp teams, recruiters, and hiring managers will need to work together to develop a strategy to address job postings and salary ranges - and soon.
Managing Comp in 2023 and Beyond
Comp pros have a lot to contend with in the coming year. To succeed, they need to maximize efficiency while providing more in-depth, nuanced information in support of business goals and talent strategy.
Technology for comp teams, including modern market pricing solutions can help bridge the gap between necessary outputs and the hands available to do the work. Our customers find that BetterComp’s ability to facilitate market pricing at scale enables their team to manage market pricing in a fraction of the time relative to legacy software tools (or, heaven forbid, spreadsheets).
If you’re tired of the same old comp challenges or want to be Better equipped to meet new ones in 2023, get in touch for a demo.
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