Several trends in our culture and economy will surely affect employee compensation and benefits in the near future. Describe how you anticipate the following to impact employee compensation and benefits in the next ten (10) years.

a. Rapid Growth of the ‘Underemployed/Unemployable’

b. Executive Compensation

c. Health Care Costs

d. The Rise of Competency-Based Pay Practices

Performance Management, Employee Retention, & Determining Pay Rates 2

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Performance Management, Employee Retention, & Determining Pay Rates 2

1. Rapid Growth of the Underemployed/Unemployed

Underemployment refers to the condition in which jobs are inadequate in relation to employee training, skills, and economic needs. In most cases, the labor force is less compared to full time or regular jobs. Unemployment, on the other hand, refers to absolutely having no job. The changes taking place in the corporate world, such as technological advancements disrupt business models forcing transformation and facilitating high under or unemployment case (Burchman, 2020). High underemployment and unemployment rates in the economy result in poverty levels and slow business growth due to reduced consumer demand. The presence of slow business growth may result in companies cutting costs by laying off part of the workforce. This means restructuring compensation and benefits packages to sustain employees left in the company and maintain financial health. Moreover, employees left in the company are allocated much work at low pays, which utterly affects a company’s compensation and benefits packages.

1. Executive Compensation

Executive compensation refers to the remuneration or pay packages explicitly designed for executive level and senior management employees in a company. It includes salaries, incentives, perquisites, and other benefits. In the next ten years, the disruptions seen in the business world resulting from technological, societal, and emerging business priorities will require executives to reshape and lead the companies during transformation effectively for long-term success. Executives with skills, knowledge, and experience will be sought out highly as they are tied to structures that support incremental or radical changes in an organization. This shows that executive compensation will explode due to the high need of advanced executives to manage these changes effectively, increase or maintain corporate performance, and establish strategic support (Burchman, 2020). Currently, some executive compensations, such as the CEOs, are termed to be out of control, with many earning millions as basic salaries. This will change and probably exceed in response to the high demand. Hence, the currently integrated executive compensation packages will be restructured to meet the emerging business priorities and needs.

1. Healthcare Costs

Healthcare benefits form an essential component of employee compensation and benefits packages. The rate of healthcare costs is highly rising today, and this trend is expected to continue in the next ten years due to rising sophisticated procedures, increasing employer costs, and utilization rates. In the last decade, healthcare costs have been growing twice as fast as wages; thus, as they continue to increase, health spending equally among families increases. As health spending among employees increases, compensation decreases. Reductions in compensations are sourced from high deductibles such as high premium contributions paid by employees (Anand, 2016). This historical data forms a foundation of what to expect in the next ten years. As healthcare costs rapidly increase, employee compensation and benefits package will be affected; in that, employees will acquire lower compensations. Moreover, compensation costs are expected to rise due to increased healthcare costs, increasing employer healthcare costs. All these aspects will alter the current structuring of compensation and benefits packages.

1. The Rise of Competency-Based Practices

Companies using a competency-based pay structure compensate their workforce based on their skill set, experience, and knowledge, other than their job positions in the company. This pay structure motivates employees to improve on their skills, which maximizes engagement and overall corporate performance (Dessler, 2013). In the next ten years, a competency-based pay structure is likely to be integrated into almost all companies to find competent and well-skilled employees to manage changes in businesses effectively. Therefore, employee compensation and benefits will be restructured to accommodate new business priorities and change payments from those based on positions to those found on KSAs (Knowledge, Skills, and Abilities).

References

Anand, P. (2016). Health Insurance Costs and Employee Compensation: Evidence from the National Compensation Survey. Wiley Online Library: Health Economics, Vol 26(12).

Burchman, S. (2020, February 26). A New Framework for Executive Compensation. Retrieved from Hrvard Business Review: https://hbr.org/2020/02/a-new-framework-for-executive-compensation

Dessler, G. (2013). Human resource management. Upper Saddle River, NJ: Pearson Education, Inc.