5 Compensation Trends to Follow in 2024 

As we enter the New Year, 2024 is set to be one of the most transformative periods in the compensation and benefits sector in recent years. A mix of legal rulings, shifting employee demands and the rise of AI is bringing about a change in how employers and their staff think about compensation. 

Companies that embrace the changes are set to gain a significant competitive advantage, and here are five of the biggest trends we see making the most impact in the months and years to come. 

 

1. Broader Benefit Packages

In: Offering broader benefit packages. 

Out: Paying higher base salaries. 

The economic decline that led to a large number of firms making cuts in 2023 is set to continue into 2024, and this will see employer focus shift from high base salaries to more comprehensive, total compensation packages.

Over the coming months, employers who are looking to minimize spend while still attracting and retaining the best talent will be reevaluating their benefits packages. They will be looking for ways to complement salaries with value-add rewards to meet the evolving needs of their staff, especially with the rising cost of living. Flexible benefits are the future because one benefit might be perceived as key for some employees, such as 401K matching or pension contributions for 40-year-old-plus employees, but may be undervalued for others. 

For populations around 30-to-35 years old, like in most larger tech companies, paid daycare is an expensive but highly valued benefit. Financial education benefits are on the rise everywhere in Europe, from awareness sessions on budgeting and managing debt to the importance of paying into a pension.  

 

2. Customized Benefits

In: Personalized, customizable benefit packages.

Out: One-size-fits-all benefits.

Going hand-in-hand with the shift towards total compensation, we’ll see benefit packages continue to become more personalized and customizable in 2024. One of the biggest lessons of the past few years is that different employees have different needs. As a result, the catch-all benefit packages of old are no longer adequate. 

Throughout the coming year, we’ll see a rise in packages tailored to the specific needs of individual employees. A flexible benefits package would allow employees to opt into the coverages and benefits they need. Some companies are giving employees a total budget per month or year with the freedom to spend it on various channels. This could include concert tickets, gym memberships, lunch vouchers, daycare and books, etc. Thanks Ben facilitates this kind of thing and is very popular. 

This demonstrates to staff that their employer understands and values their individual contributions and it gives employers a competitive advantage in the talent market. BNP Paribas Leasing Solutions, for example, offers all permanent employees access to a package of flexible benefits including everything from dental insurance to vehicle breakdown cover and season ticket loans. This is in addition to a competitive salary, bonus and pension scheme. 

 

3. Transparent Compensation Policy

In: Transparent compensation policies.

Out: “Competitive salary” on job adverts.

Following the adoption of the EU’s Pay Transparency Directive in April, companies will soon have to include the expected salary, or salary range, for any and all positions they advertise. This will see terms like “competitive salary” and other similarly vague promises become a thing of the past in 2024 and beyond. 

It’s the right thing to do, and it can help companies attract more talent. A recent survey from Resume Lab found that 80 percent of jobseekers are hesitant to apply for a job without pay information.

The result of this will see such transparency filter into the processes used to set compensation policies. Candidates and employees will be able to see the thought process that goes into determining salaries so they can be confident they are being paid fairly and equitably. 

 

4. Stronger Focus on Pay Equity

In: A stronger focus on pay equity.

Out: Ignoring the gender pay gap.

The driving force behind the EU Pay Transparency directive isn’t simply to make job adverts more transparent, it’s to tackle the core issues at the heart of the gender pay gap once and for all. 

Once it comes into force, all employers with 150-plus employees will not only have to report their gender pay gap, but they’ll have to demonstrate how they’re actively addressing and rectifying these gaps. 

As a result, we’ll see more companies in 2024 allocating a portion of their compensation review budget to tackling the gender pay gap while also introducing measures to tackle the problem and shrink the gap. 

These measures range from analyzing pay equity across the company – including in high-level positions — to reviewing and revising recruitment processes to root out any internal biases. In line with the changes to compensation packages more generally, we’ll also see parental leave, working arrangements and benefits evolve and become more personalized to address gender discrepancies. 

 

5. Increased Use of Automation

In: The integration of AI and human insights.

Out: Legacy technology and outdated process.

All of the complex changes we expect to see in 2024 and beyond, in terms of comprehensive packages, personalized benefits and more transparent compensation policies will see companies leaning even more on technology. In particular, AI and automation. 

Many of the systems and processes that have been used by companies for years, and in some cases decades, will no longer be fit for purpose. This will bring about the biggest digital transformation in the pay and compensation sector we’ve seen for some time. It’s very early but Incompass Labs shows what it could look like tomorrow: peer reviews and algorithms leading to suggestions of bonus payouts. In fact, some companies are already doing it.  

While it’s too soon to say exactly what impact AI will have on the compensation landscape, we’re confident AI tools won’t ever replace the humans at the heart of the industry. They may make life easier for HR and compensation leaders, but we’ll need the subtle nuances, intuition and expertise that only humans can provide and 2024 will be the year where this symbiotic relationship will be defined.