COMP NEWS – What is the most important factor in a healthy work environment? According to Lisa Wallace, Cofounder & Co-CEO Assemble, the most important component of an employee-employer relationship is a strong, empathetic compensation strategy.

Compensation is the single most important component of the employee-employer relationship, and as such, should be the bedrock of an organization’s people strategy. Despite its central importance, it is common for even well-intentioned companies to let building a robust compensation program take a backseat to other initiatives. Doing so is dangerous. It weakens a company’s ability to attract and retain talent, especially diverse talent, and it hurts employees and the people who depend on them. As we head into a year of looming economic uncertainty, HR leaders intent on building effective and inclusive people strategies should begin with compensation first.

While hundreds of studies and think pieces have suggested dozens of reasons that employees quit their job, Wallace argues that the basest of these reasons comes down to compensation.

Management gurus often throw around adages suggesting that the number one reason people quit their jobs is due to something other than compensation, such as having a bad manager. The implication is that the work arrangement itself – compensation awarded in exchange for performance of a particular job – is less relevant to employees than more subjective and accessory factors such as management style and company communications. Despite the lack of conclusive evidence to support these claims, they are regularly repeated with good intentions, by groups focusing on building strong company cultures and safe environments for employees.

The way to include people, she says, is to foster a strong company culture and then back that culture with a strong compensation strategy.

Inclusive and effective people strategies should foster a company culture that allows employees to bring their authentic selves to work. But compensation is what employees take with them home. Mass layoffs in tech, and the looming threat of an impending recession, have reminded us all just how much compensation matters, even to elite employees like highly-skilled software engineers and other white collar workers. This suggests that a compensation strategy matters even more during times of market uncertainty, whether driven by a recession, inflation, or both. This doesn’t mean that people leaders are obligated to give everyone a raise, in lieu of or in addition to perks. But it does mean that employers are wise to ensure that each employee is paid competitively with the market and with the company’s unique budget and goals.

Additionally, ensuring that companies are not only paying employees fairly, but also communicating employee rewards effectively is critical. Times are tough. Ensuring employees understand the logic behind their compensation and believe it is fair is the ultimate way to signal respect and empathy to your employees in a tough time, and is the single most important thing you can do to foster a diverse culture and avoid being boxed in as a “pizza party” HR leader.

To read Lisa Wallace’s full article on empathetic compensation strategies, click here.

For more Comp News, see our recent posts.