While pension plans go back to the 1600s, remuneration as the way we know it today began in the early 1900s. Workers made production-based wages (based on item or collection) or payment-in-kind, generally through accommodation and meals. Later, as markets became more complex, the hourly wage was introduced and has largely remained the standard in North America. Medical insurance, paid general holidays and sick leave, all things that are now standard or legally required, came later in its various forms.
As time has progressed, employers have had to become more creative with how they incentivized employees, hence the introduction of stock options and ESOPs, which became more widespread in the 1990s right before the dot.com boom. The purpose of the move from pure-employee to ownership-participant was two-fold: stock options provided employees with a sense of ownership (as well as actual ownership) in a business and is were and remain a valuable tool to retain talent. Employee participation in ownership in varying degrees is something still used by many tech start-ups, particularly in its beginning stages where the company struggles to compete on a base salary level with the tech giants.
Younger generations have higher expectations for base compensation. The pain of market crashes are recent enough to make the younger generation cautious and more risk averse, and earning a more robust base upfront is a priority. This preference is often supported by unusually high living costs and inflation, which require liquidity over future earnings. Financial security and expensive health costs mean that younger workers value cash in hand and health insurance benefits. Equity and stock options are important as well but not for the traditional reasons. Collaboration, purpose, and meaning are more of a motivator than the potential of income associated with company growth. More than half of Gen Z and Millennials have a side job, the 5-9 after their 9-5. For an overwhelming amount, the side job is a tool to meet costs, rather than amass income.
The COVID pandemic upended the life of the corporate worker (among many others). While some lost jobs or received pay cuts, others realized that work could look different. Compensation priorities shifted significantly between 2019 and 2021 (2020 being when the pandemic became widespread). For example, most notably, 35% more 2021 graduates prioritized compensation and benefits, 28% more prioritized work-life balance, 29% more prioritized job security than 2019 graduates.
At all levels of the employee spectrum - whether to the new graduate, early-career, Executive or in the C-Suite - individual, remuneration is complex and multiple options need to be considered to compete for top talent in the job marketplace. Employer flexibility when generating job offers is critical to attracting exceptional people.
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