Benefits and Compensation

Perks More Cost-Effective than Pay Raises for Tech Workers

For many employers, he says, perks and benefits—from healthcare to club membership to financial advising to concierge service— offer the greatest room for growth and the most flexibility for use as retention tools in 2012.

The primary reason? They’re much more cost effective than straight-up pay raises, Wudyka says.

Wudyka is the founder and managing principal of Westminster Associates, a Massachusetts-based human resource and compensation firm that specializes in pay, performance, and productivity issues.

His tips came during a recent webinar sponsored by BLR/HRhero.

Wudyka suggests the following possible perks:

  • Flextime work schedules or telecommuting options (many tech positions lend themselves to these work structures)
  • Tuition reimbursements, especially important to tech workers
  • Family-friendly work environments
  • More competitive healthcare benefits (with lower copays or premiums)
  • Challenging work
  • The latest tech equipment (it’s amazing how motivating this can be!)
  • More opportunities for training, especially in cutting-edge technologies (a big benefit for small and mid-size firms, since very large employers tend to "pigeonhole" tech employees in a single specific skills area). Tech workers don’t want to be falling behind. Training too expensive? Review the cost versus the cost of tech worker turnover says Wudyka.
  • Career development paths (do your tech workers know how they can advance within your company? Share this with them—what the prospects are for the future. Can create dual path—managerial or technical individual contributor)
  • Rewards and recognition (workers who plan to stay with their current employers are three times more likely to be happy with how they’re recognized on the job than workers who are already looking for other jobs, according to Towers Watson)
  • Help with work/life balance. Example. Pfizer has concierge services, banking, dry cleaning, etc.

Warning About Base Pay Premiums

A common way to compensate technical and scientific employees with in-demand skills is with base pay premiums, typically 5 to 15 percent of base salary. That may be the easiest way to reward tech workers, but you may find unintended consequences with this method, says Wudyka.

First of all, this approach actually raises your compensation costs overall, because the base is now higher when you calculate regular salary increases, incentive bonuses (if they’re calculated as a percentage of base pay), and other benefits such as matching 401(k) contributions.

Second, if these in-demand skills fall out of favor later, the only way to reduce the skills premium is cutting base pay—a move that’s not helpful when you’re focused on retention, Wudyka says.

Think instead about offering tech employees with in-demand skills a premium structured as a cash bonus or separate salary supplement.


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