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6 minute read
Well, 2024 is here! As with every new year, there’s that familiar mix of excitement and maybe a bit of worry about what exactly the 
future holds. No one can predict the future with absolute certainty, but there are some clear trends in the compensation space that all comp pros should be prepared for. This year, comp pros should expect to see several evolutions in the industry that could have a major impact on their day-to-day.
1. Big Changes across the Compensation Technology Space
Over the past couple years, we’ve seen a lot of movement in compensation technology, and I anticipate those smaller shifts from the past few years are going to build into waves of change in 2024.
First, the startups. A few years ago, we saw a lot of new entrants in the comp tech space, many of which raised a ton of venture funding back when the primary requirement was pretty much showing up to a pitch meeting and talking about comp. Some had good products and good business models, some had neither.
Whether venture funded or not, we’re hitting the window in which startups either sink or swim. (Don’t worry, BetterComp is like Katie Ledecky in this analogy as we’re completely self funded.) The companies that can’t quite make a go of it - and even some that are doing OK but not fully achieving growth targets - could be acquisition fodder, either for their customer lists or their technology. I can’t fully predict what will come of this, but it’s bound to be interesting. There are lots of really cool comp startups with good people and technology out there and I know most of them will end up in a good place when everything is said and done.
In other M&A news, rumors have been swirling about Payscale being for sale for the last year or so. While relying too heavily on the rumor mill isn’t wise, there’s not usually this much smoke without a fire somewhere. Regardless of who the purchaser is, history tells us that there’s high likelihood of one or more of the following happening post-sale:
- Sunsetting of products to streamline offerings: Usually the oldest or least up-to-date are the ones that bite the dust. Telltale signs that a product is being sunset include, the stopping of sales (either in total or to a segment of the market), a slowing in product roadmap, and a push to move customers to an overlapping offering. Much of which probably sounds eerily familiar to companies using MarketPay.
- Layoffs at all levels: The new owners will install their trusted people, which can bring a breath of fresh air to a stagnating company or can create a ton of disruption for the customers and people who remain.
- Changes in pricing structure: Existing customers often see new charges for features that were “free” or included before in the name of higher gross margin. This sometimes happens pre-sale, as well, when the old owner wants to get the most for their investment by showing well on the revenue front.
2. Pay Transparency Picks Up Steam
Pay transparency really took the center stage in 2023, and will continue to pick up steam in 2024, with both legislation and cultural expectations fueling that acceleration. Charlie Franklin, CEO at our partner Compa had a different take on this; it’ll be interesting to see how this unfolds.
Some states that recently joined the movement include New York (effective September 2023), Hawaii (effective Jan 2024), and Illinois (effective January 2025), with Massachusetts expected to follow suit. There is also a possibility - however slim - for pay transparency to move beyond the state level, with H.R.1599 - Salary Transparency Act introduced in the House in March, 2023. If you want more info on legislation, HR Dive maintains a running list of states and other jurisdictions with pay transparency laws on the books.
And it’s not just within the United States. Canadian provinces such as Prince Edward Island, Newfoundland and Labrador, and British Columbia (with Ontario hot on their heels), have their own regulations around pay transparency. Across the Atlantic, the European Parliament adopted the European Union’s Pay Transparency Directive in March 2023, which aims to reduce pay inequality through increased pay transparency. This directive is expected to be implemented into national law within 3 years and will affect millions of jobs across most of the continent.
But the real mover in the pay transparency space is the major cultural shift in job seeker and employee expectations. In a recent survey by LinkedIn, 91% of people said that the inclusion of a salary range affected their choice to apply for a job. That’s backed up by data from ResumeLab, which found that 80% of people wouldn’t apply to a job without a posted salary range. And, while companies can legally get away with posting outrageous or ambiguous ranges, a recent study found that job seekers tended to respond negatively to very wide ranges, particularly when there wasn’t much explanation around how pay would be determined.
Because of these shifts, adapting to the pay transparency landscape will be crucial going forward. According to insights from World at Work and Revelio Labs, this need is fueling increased demand for compensation professionals. It’s critical that comp teams start asking questions and implementing strategies to address pay transparency now, if they haven’t already.
3. AI Hype Turns into AI Value
In 2023, we witnessed generative Artificial Intelligence (AI) gain mainstream hype across multiple industries. In 2024, we can expect to see AI start to offer some real value in the compensation landscape.
Compensation professionals can expect to see new AI tools available to help streamline their day-to-day tasks. It’s important to note that AI will not replace the critical thinking abilities required from compensation leaders. Instead, AI will allow compensation professionals to work smarter and faster so that they can have increased capacity for strategic work. Developments in AI can help compensation professionals level up especially when used in combination with their knowledge and expertise.
As technology advances, compensation professionals will also be expected to level up the function by being knowledgeable of new technologies available to help keep up with demands of the ever-evolving world. For compensation technology providers, this means innovation needs to be at the forefront. As compensation professionals level up, they are going to be searching for tools that meet and exceed their expectations, and companies that are slow to innovate will be left behind.
(Advice to Comp Pros: Beware of companies loosely throwing around AI as part of their product development. Ask detailed questions about the value it provides to their current function to ensure it’s not just a PR stunt).
4. Economic Fluctuations: Inflation Cools But Is Still Sticky
In 2024, Inflation is expected to cool, even though it’s likely that interest rates will stay “higher for longer”. This duality presents a complex economic environment that compensation teams will have to navigate.
Successfully finding equilibrium amidst these fluctuations will require compensation teams to be more proactive and strategic in their pay strategy than ever before. Compensation professionals will need to remain vigilant and assess how inflation and interest rates impact a company’s financial standing and how this could have downstream effects on various components of compensation strategy such as base salary, Cost of Living Adjustments (COLA), and performance bonuses. As changes will have a direct impact on employees, compensation teams will need to be proactive in communicating changes and addressing concerns to employees. Compensation teams supporting employees globally will need to take an even more nuanced approach and consider the variations in inflation and interest rates around the world.
5. Hybrid Models Gain Traction as Remote Work Solidifies
Employees today appreciate flexibility and will continue to favor employers who allow them to work remotely at least a few days a week. Even with return-to-office (RTO) mandates, we can expect to see more hybrid arrangements as opposed to a full 5-days in office. RTO can have significant financial impacts on employees including child care, pet care, and transportation. Companies implementing return-to-office mandates may need to adjust their compensation strategy to align with employee expectations and stay competitive in the market. Compensation teams will start to need more data around remote vs hybrid vs in-office programs, and survey companies may start to collect and display this information in their reports as well.
If you want more detail, check out World at Work’s webinar, Use Total Rewards to Drive and Effective Return to Office Plan.
6. Need for Increased Market Data
In order to successfully navigate complex market conditions and balance expectations from stakeholders and employees, compensation professionals will need to do more comprehensive market analysis. In most cases, this will require more market data and diversifying the types of data. Traditional compensation surveys will remain the gold standard due to its high-volume and rigorous research methodology. However, compensation teams may find it beneficial to supplement with real-time data in order to keep up with quick market shifts.
As the volume of data grows, compensation teams will need to leverage technology solutions to help them effectively organize, manage, and analyze the data. Efficiency is key in this dynamic market, and compensation teams need to focus their time and efforts on making strategic decisions, and not on manual tasks.
7. BetterComp Becomes the Default Choice for Enterprise Compensation Teams
I may be a bit biased, but after years in the industry, I know that BetterComp is very well positioned to be a default choice for the complexities enterprise compensation teams face.
We are set up to meet the real needs of real comp teams in 4 key ways:
Customer Centricity
Unlike many of our competitors in the space, we are not PE-owned. 100% of BetterComp is owned by BetterComp employees with support from our friends and family. This gives us the freedom to truly listen to our customers and build what they really want. And since we are in this for the long run, we invest over 50% of our revenue towards Research and Development. Which leads me to...
Innovation
Instead of spreading our resources thinly across multiple solutions to get mediocre results, we focus our innovation into our domain of expertise— market pricing. This approach allows us to keep up with changing market conditions and deliver solutions that actually make a difference.
Momentum
2023 was an incredible year for BetterComp. In addition to numerous product enhancements, we doubled in both the size of our team and the number of customers we work with. It’s humbling seeing the trust compensation teams place in us. Our team is poised to carry this momentum forward, bringing further innovation to the space and providing real value for our current and future customers.
Understanding
Finally, we are built by comp pros, for comp pros. We have a team of rockstars that are passionate about bringing the best solutions to customers and moving the industry forward. Together, we are excited to tackle new challenges, grow, and make market pricing Better.
