The Great Resignation is over, the red-hot recruiting market has cooled a bit, and inflation is down. That's some of the good news for employers in 2024. But don't relax too much. Compensation is still important.

In Payscale's “2024 Compensation Best Practices Report," the majority of employers reported compensation as their biggest challenge—a bigger challenge than either recruitment or retention.

To address these challenges as an employer, it's time to ask—and find the answer to—these four questions:

1) Is it time to develop salary ranges? Salary ranges, also called salary bands or pay ranges, establish the pay parameters for a job role or group of roles. Salary ranges are based on market information in conjunction with the organization's compensation strategy and philosophy. Pay ranges typically include a minimum, midpoint and maximum amount.

If your organization is small, market pricing for individual positions can work well. But as a company grows, especially if it expands to multiple locations, finding market information for every job and location becomes difficult.

Salary ranges also provide the framework to promote consistency in offers to new hires and promotions for existing employees. In the past, many organizations offered starting salaries to new hires based on salary history, but it is now illegal in 22 states to ask about an applicant's salary history, according to HR Dive. 

Salary ranges can also help to address issues such as salary compression—when salaries of new hires equal or exceed those of experienced employees in the same or similar role—pay equity—equal pay for equal work or work of comparable value—and pay transparency.

2) How will my organization address the issue of pay transparency? Pay transparency is the practice of openly sharing information about pay with employees, according to Pay Analytics. Pay transparency is often driven by legal requirements, which vary by state but generally focus on requirements for employers to list salary ranges on job postings for open positions.

Compliance with legal requirements often means that current employees find out about pay ranges for their positions from job postings or external applicants. That can certainly cause problems. Payscale's survey reported that 14% of employers have lost employees because those employees saw posted job ranges.

Further, legal penalties for failure to comply with pay transparency laws can be significant. In the state of Washington, which allows remedy through the court system as opposed to enforcement by a government agency, one law firm filed 30 class-action suits in one week against Washington state employers accusing them of failing to disclose required salary information, according to the Seattle Times.

But pay transparency is more than compliance. It's about being proactive in your communications about compensation. That doesn't necessarily mean that everyone gets to see everyone else's salaries. What it does mean is that employees should understand how they are compensated and the rationale that determines their pay.

That might include variables such as:

• Compensable factors, such as skills, knowledge, education and certifications.
• Performance.
• Depth and breadth of experience.
• Seniority and length of service.

It's time to be proactive about pay transparency. Even if there aren't legal requirements in the locations where you do business, you need a compensation strategy that allows you to make offers to candidates and reward current employees within a fair, consistent framework. 

3) What do managers and supervisors need to know about compensation? In my consulting practice, I've often had managers and supervisors tell me that they don't have an understanding of their organization's compensation policies and practices. Sometimes the CEO is responsible for compensation decisions and doesn't effectively communicate the rationale to anyone. That puts managers and supervisors in the awkward position of not being able to answer employees' questions about their pay.

Take these steps to help your managers and supervisors understand the company's compensation approach:

• Document and distribute your compensation philosophy, policies and procedures.
• Provide managers with the skills and knowledge to answer employee questions and communicate consistently about compensation.
• Maintain an open-door policy to discuss compensation questions and concerns with all employees, and encourage your managers to do that too.
• Empower your managers to make compensation decisions for their new hires and current employees.

Managers and supervisors are ultimately responsible for the success of any organizational program or initiative. It's essential that they understand their role and responsibilities around compensation. 

4) Do employees understand their total compensation? Total compensation, also known as total rewards, includes not just base salary and other cash payments, but also the value of all employee benefits and perquisites that can be quantified. 

For many organizations, the cost of benefits, including healthcare premiums, retirement plan contributions and paid time off, can easily amount to 30%-35% of an employee's salary. That means the total compensation for an employee making $100,000 would be $130,000-$135,000.

However, nearly half of employees don't understand their total compensation, according to a 2023 survey of 2,000 employees in the U.S. and United Kingdom from beqom, a total compensation management software provider.

Organizations generally do a pretty good job of communicating total rewards when posting positions or interviewing candidates—after all, those are great marketing opportunities. But these same organizations often fall short of communicating total compensation to their current employees.

One way for an organization to improve total compensation communications is through a total rewards statement. A total rewards statement is an extremely effective tool to help employees understand the true value of working for the organization. Statements are personalized and typically produced and distributed once a year.

In the past, these types of statements have focused on quantifiable information. That includes financial information about base salary and bonus or incentive payments, as well as benefits information, including medical plan contributions, paid time off and 401(k) contributions. But some employers have started to include non-quantifiable information in these statements. That might include opportunities for remote or hybrid work, flexible and in-advance scheduling, and educational opportunities.

Growing your business means recruiting and retaining top talent. That means developing compensation plans that are both fair and competitive. It's a tough landscape to navigate, but answering these questions will help you get off to a good start.

Susan Palé is vice president of compensation at The Workplace Advisors. The Workplace Advisors is the endorsed HR partner of Big “I" Hires, the Independent Insurance Agents of Virginia, Big I New York, Big I New Jersey and Big I Connecticut.