People Analytics: 3 Ways to Fix the Biggest Compensation Problems

Companies need to closely assess how they pay employees. Problems with pay can lead to low morale, high turnover, and subpar performance. But there are steps companies can take to make their pay practices more fair, transparent, and data-driven.

Enter people analytics, which uses technology and employee data to bring insights to HR. Using people analytics, pay managers can identify and address pay gaps, optimize incentive programs, and better align rewards with performance. People analytics helps solve the biggest pay challenges and create a pay program that works for both companies and employees.

People Analytics Enables Smarter Compensation Planning

With people analytics, HR can move pay planning from an art to a science. Instead of relying on gut instinct and anecdotal data, companies can use advanced analytics to make strategic, data-driven decisions around pay. Here is how:

• Analyze pay data across the company to spot biases or areas for improvement. Look at gender pay gaps, role-based differences, performance variances, and more.
• Use predictive modeling to forecast the impact of changes to pay structures. This allows for scenario planning to optimize budgets.
• Leverage benchmarking data to keep pay competitive externally while maintaining internal equity.
• Identify flight risks based on pay and take proactive retention measures.
• Gauge the potential ROI of pay investments through advanced ROI modeling.
• Continuously monitor pay metrics and adjust strategies as needs evolve.

Briefly, people analytics takes the guesswork out of pay planning. By using data and analytics, HR can develop competitive, fair pay packages. These packages not only aid in attracting and retaining top talent but also align seamlessly with business goals. The result? Happier, more productive employees across the company.

People Analytics Helps Assess Pay Equity

People analytics can shine a light on pay gaps and inequities. Here are five ways it helps:

• Analyze pay data across gender, race, age groups, and other demographics to spot discrepancies. Look at factors like base pay, bonuses, and equity awards.
• Build statistical models to control for valid drivers of pay like performance, experience, role, and geography. This isolates any unexplained pay gaps.
• Continuously monitor pay overtime. People analytics makes it easy to track metrics and trends. Quickly identify if certain groups are receiving unfair pay.
• Simulate the impact of changes to pay structures and policies. Test if adjustments improve equity before implementing them.
• Share clear insights with leaders. People analytics provides the hard evidence needed to drive change.

With people analytics, companies gain unique visibility into pay. They can dig into the numbers, understand the root causes of inequity, and take purposeful action. Employees receive fair pay based on merit, not demographics. It is a win-win for the business and its people.

Transparency Increases Employee Motivation

It is human nature for employees to feel more motivated when they understand the reasoning behind their pay packages. Being transparent about how pay is determined helps build trust in the system.

• Publish clear guidelines on how the company calculates pay based on level, performance, tenure, and other factors. This allows employees to check the math themselves.
• Communicate the changes to the pay structure and the rationale behind them. For example, adjusting base salaries to be more in line with the current market.
• Allow employees access to anonymous pay data broken down by role and level. This transparency empowers people to have informed discussions with their managers if they feel their pay is unfair.
• Consider opening up the books on the company's overall profitability and how that impacts the pay budget. The more context employees have, the less likely they are to make inaccurate assumptions.

Transparency brings pay decisions out of the shadows. It also gives employees the information they need to understand the logic behind their pay. This builds confidence in leadership and keeps motivation high.

In a nutshell, people analytics can help solve the biggest pay issues facing companies today. By taking a data-driven approach, HR leaders can ensure pay equity, boost retention through personalized rewards, and structure plans to drive performance.

At the end of the day, pay is not just about the numbers on a paycheck. It is about making sure the employees feel valued and motivated. With the insights from people analytics, companies can create pay programs that are fair, competitive, and aligned to business goals. The data does not lie —this is the future of total rewards.