Designing a Compensation Strategy that Works for all Generations
September 26, 2017
Today’s Workforce, by the Numbers
HR professionals are challenged to find the right compensation strategies to satisfy three different generations in the workforce. There’s no one-size-fits-all strategy to recruit and retain Baby Boomers, Generation X, and Millennials. Savvy compensation strategists will have to create pay tiers and benefits packages that speak to each generation.
According to Pew Research, the three prominent generations in the workforce are:
|Baby Boomers||Generation X||Millennials|
|Born 1946 to 1964
Age in 2018: 54 to 72
In labor force: 44.6 million
|Born 1965 to 1980
Age in 2018: 38 to 53
In labor force: 52.7 million
|Born 1981 to 1997
Age in 2018: 21 to 37
In labor force: 53.5 million
Each Generation Values Different Priorities
Baby Boomers are retiring at a steady pace now, and those that haven’t retired yet are in the final planning stages to do so within the next 10 years. These dedicated, hard-driving employees need help with retirement planning and job security. They would also value flexible options that help them transition into retirement by remaining in the workforce either as part-time or remote employees, or even consultants.
Generation Xers were born to career-driven Baby Boomer parents in an era of high divorce rates. They value their independence and question authority. Generation X makes up a large part of the managerial base in most industries today. They place strong emphasis on life outside of work—especially family. On the home front, they are raising teenagers and sending them off to college—and starting to turn their attention toward planning for retirement.
Millennials grew up completely engaged with and enabled by technology. They’re the most racially diverse generation in U.S. history, with a large number of immigrants. In their personal lives, Millennials are saddled with high student debt and are in the phase of life where they’re getting married, purchasing homes, and having children.
It’s Not All About the Money
While pay is the most important benefit for all employees, a paycheck alone does not complete your compensation strategy. Present the value of each employee’s compensation as a total package. Creative, above-average voluntary benefits programs enable employees to pick options that work best for them. A MetLife survey revealed that 72% of employees “agree that the ability to customize benefits increases loyalty.”
For Boomers, focus on benefits that improve financial stability and offer transitions to retirement. Generation X and Millennials appreciate flexible schedules and remote work opportunities, as well as career development and learning opportunities. Millennials also appreciate programs that give them a financial leg up—from student loan aid to discount programs.
Tips for Developing the Right Compensation Strategy
- Wage pressure is likely to increase. U.S. companies have handed out 3% salary increases, on average, for the past several years. But with unemployment at all-time lows and the economy heating up, employees may start getting restless in 2018 if wage growth remains stagnant.
- Both Gen X and Millennials highly value flexibility. Remote work and flexible scheduling can go a long way toward satisfying and engaging these employees.
- Focus on career enablement. 42% of top performers believe they must leave their current employer in order to advance their careers. Show employees how they can learn new skills and move into new roles within your organization.
- Keep up with the market. In some fields—particularly science, technology, and engineering—compensation trends are fluctuating rapidly, resulting in annual pay raises in excess of 10%. Make sure you research compensation regularly.
- Don’t forget your contractors. In the “gig economy,” contractors make up about one-third of the workforce, so HR professionals need to keep track of the current rates for contractors, as part of their compensation research.
Tools that Support Multi-Generational Compensation
The three generations in the workforce may not share a lot in common, but having self-service access to compensation information is universally popular. Asure Software’s cloud-based SaaS payroll & tax tools give employees the ability to view/print pay stubs, download W2s, and review and request PTO.