About Compensation

Compensation Variables

What factors impact levels of compensation?

Supply & Demand

There is an acute nationwide talent shortage in many different areas now. From nurses and engineers, to teachers and plumbers – there simply aren't enough skilled workers to meet the current demand.

One of the biggest influences on compensation is supply and demand. When there is a great deal of something available, it is less expensive than when it is scarce. For example, a glut of products on the shelves leads to sale prices; a shortage drives the price up.

The more specialized the skill set and experience, the more need there is for those talents and the higher the compensation required or earned.

Combat Pay

When soldiers go to war, extra pay is awarded due to the hazardous duty required. All compensation is impacted by the influence of “combat pay.”

The window washers who clean high-rise building windows in metropolitan areas make many times the hourly pay of their small-town counterparts. A member of the police force in New York City likely makes far more compensation than did Fred, the foot patrol policeman in a small New Jersey town.

If a role of support is 24/7 and someone has to be awake in the middle of the night to accommodate global time zones, the compensation has to be higher than with a position where someone gets to end work at a daily consistent time. The support role for an extremely challenging and unreasonably demanding manager will earn higher compensation than someone who assists a reasonable. communicative, appreciative person.

Potential for Professional Growth

When there is potential for learning and growth, the acceptable compensation can be less than for a position where that growth potential is limited.

Meaning and Passion 

Because many people are longing to help solve the world’s big problems, if a position offers “work with meaning” and is contributing to society, the position will be able to attract more talent for less compensation than for a company that has different values.

When there is “meaningful” work, financial compensation can be slightly lower because of the fulfillment or emotional component of the work Most of us work for free when something matters deeply to us. We raise children, we do volunteer work, and enjoy hobbies which in turn grant us challenges, but they also deliver "emotional compensation."

People’s desire for meaning in their lives skews the level of acceptable compensation. A non-profit organization attracted a recent candidate who could have commanded at least $20,000 more annually in a “for-profit” business that offered less personal meaning and satisfaction. But her deep passion for the cause of this non-profit created psychic and emotional compensation which, in her mind, minimized the actual financial disparity.

Virtual or On-Site/In-Office

Compensation will reflect the challenges in the workplace relative to the number of qualified people willing to do each variation of virtual/in-office work. The fewer available, the higher will be the compensation needed to attract workers.

The pandemic has allowed time for people to self-reflect and become more self-aware about what is important to them.  In some cases, a desire to have more balance in life has become a top priority. Some people have realized that they can be as productive at home as in the office. A high percentage of people simply don’t want to go back to the “old” way of working and commuting. Others have had chaotic experiences while trying to balance homeschooling with work and life and are exhausted.

Whether someone has the flexibility to work virtually part- or full-time impacts levels of compensation.

Current statistics show that more than 40% of employees polled are willing to quit their jobs if they are required to return full-time to in-office work. This will require employers to pay higher wages for those who will work full-time in the office.

Geographic Variations

With so much virtual working, there is heated debate about compensation when people move out of the original hiring area to another location – they would like to keep their SF Bay Area compensation while working in Montana or Thailand. How it will all shake out has yet to be determined.

Traditionally, the cost of living associated with different geographic locations impacts compensation in that area. Recently, we recruited a senior-level Executive Assistant from the Dallas/Fort Worth area, where she was making a high salary for the area. She wanted to relocate to the Bay Area to be near family and was offered a similar salary. However, after careful consideration of the cost of living differentials in terms of the increased housing costs, as well as the higher rate of California taxes, the personal benefits of the move did not offset the perceived sacrifices relocation would require.