Rethinking talent and compensation in a shifting economic landscape

The global economy has repeatedly disrupted the workplace, and the COVID-19 pandemic led to a massive shift in workplace trends. Lockdowns and a swift shift to social distancing forced a rapid transition to remote and hybrid work models. This disrupted the traditional nine-to-five structure, particularly in work-intensive hubs like Singapore, giving unprecedented flexibility to employees.

Beyond flexibility, the pandemic underscored the criticality of employee wellbeing, and this evolution has created a complex balancing act: supporting productivity while prioritising employee wellbeing and fair compensation.

Earlier this year, the Singapore government announced a series of guidelines on flexible work arrangements that will go into effect on 1 December 2024. These aim to help organisations navigate the changing world of work. With such a shift in workplace trends, organisations must develop metrics that accurately assess performance while creating a positive and supportive work environment.

Compensation in an economic downturn

Economic headwinds force organisations to balance cost-cutting measures with employee retention and motivation. With the recent economic climate shifting dramatically post-pandemic, rising interest rates and uncertainty have impacted business operations.

“Organisations have begun shifting towards a total rewards approach, which includes not just base salary but also benefits, bonuses, and other forms of remuneration, like equity compensation, to stay competitive in today’s economy.” – Bhavik Vashi, Managing Director, Carta

The pandemic has also triggered a wave of resignations, with millions of employees re-evaluating their careers and priorities. These exits have since created a competitive job market, forcing organisations to rethink their employee value propositions (EVPs). Gone are the days of relying solely on monetary compensation. Organisations have begun shifting towards a total rewards approach, which includes not just base salary but also benefits, bonuses, and other forms of remuneration, like equity compensation, to stay competitive in today’s economy.

Building trust in the digital age

The digital age has increased employee expectations for transparency, including clear communication on career growth and compensation. However, a critical knowledge gap around equity compensation prevents organisations from effectively leveraging it as a retention tool. Employees’ lack of understanding about equity leads them to focus solely on base salary, overlooking the holistic value proposition organisations offer.

When employees do not understand the value of equity and how it ties to the organisation’s performance, comprehensive compensation packages lose their intended impact. This disconnect between employee and employer highlights the crucial need for equity education.

To bridge this gap, organisations must make equity easy to understand through clear and accessible education. This means explaining the impact of organisational milestones, such as going for an IPO, and what that means for employee stock options. By doing so, organisations can help employees feel like owners and part of the organisation’s “growth journey”. This, coupled with greater transparency, ensures employees understand how their contributions translate to compensations.

Balancing the scales

In today’s competitive talent market, finding the right mix of talent and managing costs can be a challenge. A 2023 Michael Page report indicates that over 70% of employers in Asia-Pacific are facing talent shortages, highlighting the fierce competition for skilled employees. This is where thinking outside the box and embracing innovative solutions become critical. By exploring a wider talent pool, organisations can find skilled individuals who can help the organisation grow in different ways. Through segmenting roles, organisations can better tailor their offerings while also managing budget constraints.

READ MORE: EVP as the MVP: How to use benefits to keep talent

Fractional executives, for example, are seasoned professionals who work for multiple clients simultaneously, rather than committing full-time to a single organisation. They can share their expertise on a part-time basis, offering organisations valuable guidance without the full cost of a permanent hire. This model is particularly helpful for start-ups and organisations with specific, short-term needs. By incorporating fractional executives into their workforce, organisations can improve talent acquisition, reduce costs, and create a more diverse workplace.

The evolving workplace demands a new approach to talent management. Organisations must adapt to the changing expectations of employees while balancing financial constraints. By prioritising employee wellbeing, offering transparent compensation packages, and exploring innovative staffing solutions, organisations can build a high-performing and engaged workforce. Ultimately, success in the modern workplace hinges on creating a culture of trust, transparency, and employee empowerment.

About the Author: Bhavik Vashi is Managing Director of Carta.