Why Your Comp Strategy Is Outdated and What to Do About It

Running HR at a small business is tough—super tough.

You’re wearing multiple hats. One minute, you’re sorting through health plan benefits and handling open enrollment issues. The next, you’re thinking about how you can impact employee engagement and fulfill hiring needs.

And you’re doing it all with limited resources and a limited budget.

Plus, let’s not forget about another key responsibility you have: compensation.

Smaller businesses haven’t traditionally been able to offer compensation the focus it deserves.

But what if I told you that’s changing?

What if I told you there are four ways you can tweak your compensation strategy to help you attract and retain the best talent for your organization?

Spoiler alert: There are. And it’s all thanks to the democratization of data—or, in other words, the wide accessibility of good comp data to all companies.

Even smaller ones, just like yours.

Throw Out the Old Way of Doing Things

Let’s first take a look at our current processes for market pricing—and why they don’t work.

At best, we’re buying one survey to help us keep tabs on our market. Then we take that broad data and try to make it work.

But it doesn’t.

It’s not specific to our jobs. It doesn’t cover our geography. It’s just not good enough.

So we head to sites like LinkedIn or Glassdoor to see what others are paying. (This seems like a better idea since it’s less costly and time-consuming than the whole survey-buying approach.)

We go to these sites seeking answers, but we don’t find them because the data there is often thin or old.

One thing’s for sure: Something has to change.

The way we approach compensation hasn’t changed in decades. We still rely on outdated processes, old data, and a lot of manual effort. This has a direct effect on our ability to attract and retain the best employees.

But, as I said earlier, the democratization of data is changing all of that. Now companies of all sizes have access to the same data.

Pay Above the Median

Smaller companies have something the big companies don’t.


Flexibility to aim higher, set yourself apart, and better compete for talent.

At least 80 percent of the market pays at the median. But I’m here to challenge you to use your flexibility to pay above the median.

And it’s more affordable than it sounds.

Say you shift your pay from the median (the 50th percentile) to the 55th percentile for a $75,000/year job. It should cost you about $5,000 to $7,000 more per year to make this move.

But to replace a non-executive role? It costs 21 percent of an employee’s annual salary.

So it would only cost $5,000 to $7,000 more per year to keep a valuable employee—but it’ll cost at least $16,000 to replace them.

And that’s not even factoring in any lost production from the gap created by an open role. That’s ignoring ramp time. And that’s assuming you could fill the role for the same salary.

In short, paying above average can lower your turnover rates, and it can increase employee engagement and satisfaction. But, above all else: It just makes business sense.

Ensure Fair Pay

Aside from the legal reasons to move towards equal pay, it’s just the right thing to do.

You’ve seen massive organizations like Salesforce.com take major steps to identify and true-up gaps in their pay practices. And they’re doing this because they understand the impact it has on their employees.

And guess what? As small businesses, it’s even easier for us to vow equal pay, because we’re working with fewer data and rules.

Leveraging our own employee data and comparing it to the market will help us do this.

Don’t Just Give Three-Percent Raises

My final tip to help you better retain talent? Don’t just give three-percent raises.

I know three-percent raises are common. Unofficially, they’re kind of like the industry standard.

But three-percent raises don’t put you at an advantage when it comes to retention.

If your people can go to a different organization for a 10-percent pay increase, why would they settle for your three-percent raise? (They wouldn’t.)

By equipping yourself with the right info and data, you can assess the market, and look for creative ways to offer merit increases that will truly differentiate you as an employer of choice.

Honestly, by equipping yourself with the right info and data, you can do anything. Anything when it comes to compensation, at least.

It’s time we make decisions about pay using the most accurate, most recent, and most reliable data out there.

Thanks to the democratization of data, this data is now available to us—and to everyone.

About the Author

As SVP and GM of Payfactors, John Sutliffe responsible for the end-to-end go to market strategy for Payfactors Free. Bringing with him more than 20 years’ experience and over a decade in HR tech, John has a deep understanding of compensation, benefits, and total rewards. Previously, he led the sales team at Virgin Pulse.