With  Q2  upon us, your business needs and goals may require some new employees to grow your business. A challenge many owners and leaders encounter is cost- how will these new employees be compensated? What is an appropriate salary range? Is it sustainable for the long term? In this blog, we will explore the top 5 common compensation challenges faced by business leaders and strategies to overcome them.

Pay Transparency and Pay Equity​

Pay transparency addresses wage disparities in organizations by openly displaying salary ranges.  This helps employees have a better understanding of compensation practices within their organization. One of the key aims of pay transparency laws is to address and reduce gender, race, or other types of discrimination in pay. By making salary information more transparent, employees can identify disparities, and employers are compelled to justify any pay discrepancies based on objective criteria rather than discriminatory factors. The intent of this law is to move to a place of pay equity.

Pay equity ensures compensation fairness among employees in similar roles. Pay equity continues to be a top concern for employers of all sizes. As more employers adopt diversity, equity, and inclusion goals as part of their organizational mission, ensuring that employee compensation does not perpetuate inequality along the lines of race, gender or other protected characteristics is a critical step toward realizing those goals.

Staying Competitive in a Tough Market

There are hundreds of job postings that job seekers are faced with each day, and salary is often the first concern of most job seekers. Many job seekers filter through postings by base pay. If your job posting is below the market value, your posting may be overlooked.

To remain competitive in the job market, your team should create a strategy to stay up to date on salary benchmarks for your industry and positions. This will help your team have a general guide of appropriate ranges for positions you will post in the future.

Top 5 Frequent Compensation Challenges Faced by Business Leaders:

  1. Market Competition and Talent Acquisition

Business owners are frequently confronted with the challenge of attracting and retaining skilled professionals in a highly competitive job market. The demand for top talent often exceeds the supply, leading to salary inflation and putting additional pressure on compensation budgets.

Solution: Stay updated on industry salary benchmarks, offer competitive benefits, and focus on creating a positive work culture to make your business an attractive employer of choice for skilled professionals.


  1. Budget Constraints:

Small and medium-sized businesses may face budget constraints when it comes to compensating employees. Balancing the need to reward employees while keeping costs in check is a delicate act that requires strategic planning.

Solution: Implement a transparent compensation structure, prioritize key positions for competitive salaries, and explore non-monetary benefits such as flexible work schedules or professional development opportunities.


  1. Variable Performance and Compensation:

Linking compensation to performance is a common practice, but it comes with its own set of challenges. Determining fair and objective standards for performance evaluation can be subjective and may lead to dissatisfaction among your employees.

Solution: Clearly communicate performance expectations, provide regular feedback, and establish a fair and transparent performance review process. Consider incorporating a mix of short-term and long-term incentives to motivate employees.


  1. Legal Compliance and Regulatory Changes:

Staying compliant with ever-changing employment laws and regulations is a constant challenge for business owners. Failing to adhere to legal requirements can lead to penalties and damage the company’s reputation.

Solution: Regularly review and update compensation policies to ensure compliance with local, state, and federal laws. Seek legal counsel when needed and stay informed about changes in labor regulations. Stay up to date on compliance by reading ESC’s compliance blogs.


  1. Employee Expectations and Engagement:

As the workforce evolves, so do employee expectations regarding compensation and benefits. Business owners need to strike a balance between meeting these expectations and aligning compensation strategies with the overall business goals.

Solution: Conduct regular surveys to understand employee preferences, communicate openly about compensation decisions, and emphasize the connection between individual contributions and the company’s success. Creating a culture of accountability increases productivity, customer service, and your employees’ job satisfaction.

Alternatives to Compensate Your Employees:

It may not be possible to budget funds for salaries, however, there are other options your business can explore that can provide great benefits for your employees.

Providing a stipend to your team for things such as:

  • Wellness and self-care
  • Home office supplies
  • Professional development opportunities
    • Perhaps your employees can participate in a training, CEUs, or seminars a few times a year to further develop their skills.
    • Offer employees reimbursement for any certifications or courses they complete that relate to their position.

Non-monetary benefits can also be offered to employees, such as:

  • Flexible work options
    • Providing the option to work a flexible schedule, allowing employees to work a few days remotely as well as in office.
    • A shortened workweek: Employees may be just as productive working a 4-day work week compared to 5 days a week.
    • Offer summer hours for employees: You can close the office a few hours earlier than usual so employees can enjoy an early start to the weekend.
  • Additional time off
    • Employees will appreciate having the ability to take some extra time off to travel, spend time with loved ones, or just have a day to themselves.

Compensation challenges are something that every business must face. However, with a proactive and strategic approach, you and your team can successfully navigate these challenges. By prioritizing transparency, staying informed about market trends, and adapting to the evolving needs of the workforce, businesses can build a compensation strategy that not only attracts top talent but also fosters employee satisfaction and loyalty.

We help hundreds of businesses navigate challenges like these every day and can help you plan an appropriate compensation management plan for your business. Please contact us to learn how we can help your business.