Everyone works for a paycheck, but employees are looking for
more than just a deposit into their bank accounts at the end of every month.
Offering a good benefits package, or in other words, indirect compensation,
is crucial to attracting and retaining the right talent, especially as the war for talent
isn't ending any time soon. Consider this: 73% of respondents in a Prudential
survey identify benefit programs as a big reason for staying at a job.
Let’s take a good look at why indirect compensation
matters and what are some examples you can learn from.
*MUSIC*
Hi, Neelie here. Welcome to another episode of Learning Bites. In today’s
video, we’ll talk about what indirect compensation is, why it’s important,
and how it’s different from direct compensation, as well as some examples.
Before we start, don’t forget to like our video,
click the notification bell, and subscribe to our channel! And if you want to know more about
key Compensation and Benefits metrics you should be tracking,
be sure to follow the link in the description to download our full guide on this topic.
Now let’s talk about indirect compensation.
Simply put, indirect compensation is any benefit you offer to your employees that
doesn’t come in the form of cash. Common types of indirect compensation include insurance,
gadgets, or health and wellness programs.
The main difference between direct and indirect compensation lies in
their quantifiability or lack thereof. It’s fairly easy to give job candidates facts,
figures, and actual dollar amounts when it comes to future salaries or the company’s
contribution to the pension scheme. It is much harder, however, to quantify the little things
that can make a huge difference, such as health insurance or free childcare service.
Here are two reasons why indirect compensation matters:
Compliance: Even if you tried to, you probably won’t be able to take a job with no indirect
compensation, for the simple fact that it’s illegal. Many countries have laws
that require every job to have some indirect types of employee benefits,
such as health insurance or paid vacation time.
Talent acquisition and retention: Indirect compensation, especially the non-mandatory ones,
is an incredibly useful tool to attract talent, build loyalty, boost retention,
and encourage productivity. Silicon Valley-style perks like laundry services,
concerts, and massages might seem over the top, but they can make a world of difference if your
candidates are torn between two job offers. Now that we’ve established what indirect
compensation is and why it matters, let’s look at four examples of indirect compensation.
Insurance
Your company may consider offering healthcare, life, disability, legal
or other types of insurance. Health insurance, in particular, is an extremely attractive benefit,
especially if you’re based in countries where the cost of healthcare is expensive.
59% of respondents in a PwC survey identify financial issues as the top
cause of their stress, while another 10% point towards health problems.
Offering health or life insurance gives your employees security and stability. In the wake
of the COVID-19 pandemic, everyone is now keenly aware of how rapidly their health and
financial situation can change, making insurance an even more attractive benefit. With up to 40%
of the global workforce considering leaving their employers this year,
offering quality insurance can make the difference
between attracting qualified candidates and struggling to keep your current staff.
Paid Time Off
Many countries have strict laws around the minimum amount of paid time off
companies have to offer their employees and how employees can use sick time. But
employees almost always appreciate more vacation time.
This has become especially important following the pandemic. Research from Prudential shows
that workers now place significantly more value on paid leave as a benefit, from 31% during the
first wave of the pandemic to 52% during the second wave. Hubspot, for example, made July
5th to July 9th their global week of rest in 2021, where all of their employees are off work.
Wellness programs
The pandemic hasn't just put our physical health at risk. New research from Total
Brain shows that the risk of PTSD in US workers is now 50% higher than pre-pandemic,
while anxiety level among workers aged 20-39 has risen by 29% between July and August 2021.
So it's no surprise that many companies are offering wellness benefits. If you want to
add it to your benefits package, you could consider offering discounted or even free
counseling service, access to mindfulness apps,
or a gym membership. You can also take a page out of Silicon Valley start-ups’ book
and consider less traditional mental health services like spa vouchers or pet therapy.
Childcare
Daycare is expensive.
Companies that can offer free or subsidized daycare boost the disposable income level of
their employees with young children. But that isn't the only benefit this benefit offers.
According to McKinsey, the added burdens at work and at home since the COVID-19 crisis
began have pushed roughly 33 percent of working mothers to consider downshifting
their careers or leaving their jobs altogether. The same report reveals that nearly a quarter
of mothers said they worried that their work performance was being judged negatively because
of their caregiving responsibilities, compared with 11 percent of fathers.
In other words, offering free or subsidized childcare is a
way to make your organization more diverse, inclusive, and equitable,
and to help working mothers -- and all employees with young children -- feel like they belong.
This is just a handful of the many types of indirect compensation you can offer.
When it comes to choosing which benefits to offer,
the key is to find out what your employees value and keep in line with your competitors.
Do you have tips on building a killer indirect compensation package? Share them in the comment
section below and, as always, don’t forget to like our video, hit the notification button,
and subscribe to your channel.
See you next time!