Is Compensation No Longer King? It’s Complicated.

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It’s a seller’s talent market, and the question on every recruiter’s mind is: How do you get candidates to choose your roles over all the rest? If you believe the hype, financial compensation isn’t the answer.

But is it true that candidates now value the intangibles — like flexibility, a positive culture, personal development — more than cold, hard cash?

The answer isn’t quite so simple as a definitive yes or no.

Workers Across Industries Are Restless

In all segments of the U.S. workforce — from white collar to blue, the corner office to the front lines — employees have the power, and they’re on the move. According to a recent survey from Citrix , 40 percent of U.S. knowledge workers have left a job in the last year or are thinking about doing so. Axonify’s “State of the Frontline Work Experience”  report found that 45 percent of frontline workers plan to leave their jobs. Some industries have it harder than others: For example, 66 percent of companies  say they can’t find enough workers in construction.

What are these workers looking for as they leave their old jobs or pass on new opportunities that don’t sufficiently entice them? Many people will tell you they’re after those intangibles. For example, that Citrix report found that 80 percent of workers value flexibility and remote work, and 55 percent would take pay cuts in exchange for said flexibility.

Other expert sources point to similar feelings among frontline workers, stressing the need to invest in a positive employee experience to attract and engage these candidates. The things for which employees would ostensibly take a pay cut, in addition to remote work and flexibility, include meaningful workmentorship, and even better technology.

There is no doubt employees genuinely do consider all these factors when thinking about new job opportunities — but data suggests we’re downplaying compensation’s role in recruitment and retention.

Who Wears the Crown?’s Recruiter Index survey  has been tracking the state of the U.S. job market since April 2020. One of the key questions we ask recruiters, HR pros, and talent acquisition experts every month is: What do candidates value most when assessing new job opportunities?

While there have been fluctuations in candidate priorities over time, one thing has been true nearly every month: Compensation comes first. To illustrate, let’s take a look at how candidates’ top four priorities have shifted over the last six months.

The graph clarifies that compensation has consistently been the most commonly cited candidate priority every month since April. One would have to go back to the fall of 2020 to find a month in which compensation was briefly knocked from the top slot by remote work. Even then, compensation quickly regained the lead and has stayed there ever since.

Admittedly, one could read this graph as a defense of the intangibles. If you consider remote work, work/life balance, and opportunities for new experiences collectively, they far outpace compensation in terms of candidate priorities. But it’s not certain that every candidate values the same intangibles. Job title and paid time off have come in dead last on the list of candidate priorities every single month, so it’s clear that some intangibles are worth more than others.

According to this graph, candidates are clearly after the intangibles, but the paycheck has to be right, too. Compensation is, in a sense, still king, but now it shares the crown.

Rumors of Compensation’s Demise Have Been Greatly Exaggerated

If compensation consistently ranks in the top spot when it comes to candidate priorities, why do so many people — even experts in recruitment and retention — believe intangibles now matter more to talent? A few factors are likely at work, the most immediate of which is that nearly every organization wants to hold onto as much money as it can in the post-pandemic landscape. 

Speaking in strictly financial terms, employers have an intrinsic motivation to pay workers as little as possible. That’s not to say that every company is cheating employees out of rightful wages — merely that smart spending always means getting the most bang for your buck.

This urge to save has grown stronger in recent months because many companies saw their bottom lines hit by lower demand and mandated shutdowns during the pandemic. As a result, organizations may be reluctant to pay out higher wages to attract talent today. The narrative surrounding compensation’s loss of kingship comforts these companies because it lets them believe they can get top-tier talent without paying the price. 

By now, many of those organizations have seen the flaws in that thinking — especially in blue-collar and frontline industries, which are currently racked by an ongoing wave of strikes . Various grievances propel the strikes, but nearly everyone has “better pay” among its list of demands.

Long Live Compensation (and Intangibles, Too)

Like so many post-pandemic trends, however, compensation’s supposed dethronement isn’t a post-pandemic trend at all. Instead, COVID-19 amplified and accelerated a preexisting trend. As mentioned earlier, the business press has heralded workers’ willingness to take a pay cut in exchange for the intangibles for years now. The research isn’t lying — it’s a valuable revelation that no amount of money can make a person stay in an organization that treats them poorly.

But ever since that revelation came to light, we’ve been hypercorrecting, swinging so far in favor of the intangibles that we’ve lost sight of an essential fact. People like meaningful work, and they like to be treated well, but at the end of the day, they have jobs because they have bills to pay. Compensation will, to some degree, always be king.

That said, intangibles are likely more important now than they were before the pandemic. The last year and a half have been harrowing for many. By some estimates , employee burnout rates have doubled since March of 2020. It makes sense that employees are looking to work in companies that take their health and well-being seriously.

The lesson here is not to focus on intangibles exclusively but to combine good intangibles with competitive pay. Having great intangibles may well allow you to pay a slightly under-market rate for top talent. Still, if you go too low, those intangibles won’t matter at all. 

What does this all mean for recruiters? Compensation has to be a big part of the conversation when engaging with talent today. Don’t shy away from it or cover up lackluster pay with flashier perks. Instead, give equal airtime to salary, benefits, and those quality-of-life improvements in your discussions with candidates. 

And if your company or client can’t afford to pay market rates, don’t assume intangibles will be enough. 

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By Matthew Kosinski