Garry Straker – Will These Surprising HR Trends From 2023 Continue Into 2024

Connect with Garry Straker:

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Connect with Dwight:

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• dwight.brown@salary.com

Connect with David:

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• david.turetsky@salary.com

Podcast Manager, Karissa Harris:

• HRDataLabs@salary.com

 

Production by Affogato Media

Resources:

• Compensation Consulting
• HR Data Labs Season 7 Episode 5
• HR Data Labs Season 7 Episode 3

• “The labor market is going to look very different in 2024, and it’s going to be important for employers to better manage their internal labor markets.”
• “If [employees] are underperforming, . . . [companies] need to have the systems and processes in place to be able to identify that and address it quickly."

Announcer  00:02

Here's an experiment for you. Take passionate experts in human resource technology, invite cross industry experts from inside and outside HR. Mix in what's happening in people analytics today. Give them the technology to connect, hit record for their discussions into a beaker. Mix thoroughly. And voila, you get the HR Data Labs podcast, where we explore the impact of data and analytics to your business. We may get passionate and even irreverent, that count on each episode challenging and enhancing your understanding of the way people data can be used to solve real world problems. Now, here's your host, David Turetsky.

 

David Turetsky  00:46

Welcome everyone, to a very special HR Data Labs podcast sponsored by Salary.com. Hi, my name is David Turetsky. I'm the CTO and VP of Consulting here at Salary.com. And I have with me, my very good friend, and special guest, Gary Stricker, who is one of our consulting partners here at Salary.com. Gary, how are you?

 

Garry Straker  01:06

David, I'm terrific. So nice to be with you here again, today. I always love connecting with you.

 

David Turetsky  01:10

Well, we usually have a really great time with you on the podcast. And I think today is going to be no exception. Garry, why don't you give us a little bit about your background, and how you've gotten to this point.

 

Garry Straker  01:19

Yeah, so I've been a total rewards professional for almost 25 years. And during that time, I've had an opportunity to work with, you know, many different clients in different parts of the US and some internationally, and many different industry segments, you know, many different pay markets. So, you know, I've really sort of enjoyed that 25 year run. And I will tell you the last few years, as you know, David has, is really, it's been a lot more sort of interesting and fascinating, in some ways, challenging than maybe the many years prior to that. But it's a fun time to be doing what we do.

 

David Turetsky  01:49

It is fun. And we're going to be talking a little bit about some of that fun that we've seen over the last year, and then what we're gonna expect. But Garry, before we get there, what's one fun thing that no one knows about you?

 

Garry Straker  02:01

Yeah, I know, you're gonna ask that. It's always a challenging one. But, you know, I've, I have a sort of an interesting sort of career which started out in the theater, believe it or not. And back in the day, I, I spent many years as you and I both did, living and working in London. And during that time, I had an opportunity to work for the Royal Shakespeare Company. Not many people know that and was a time that I sort of thoroughly enjoyed. And, you know, lots of lots of fond memories.

 

David Turetsky  02:30

I wish I would have seen one of the productions that you are part of.

 

Garry Straker  02:35

Maybe you did, actually, you know, we I know our time in London overlap a little bit. Yeah.

 

David Turetsky  02:39

Oh, no, that's really cool. Yeah. Well, one of the fun things that we get to do on the HR Data Labs podcast is talk to brilliant people like you. And today is no exception, because today we're going to be talking about the things that surprised us about 2023 The things that we expect to happen in 24, and maybe even what might happen in 25. So let's start let's talk about what trends do we think we're going to be bigger in 2023. And kind of what surprised you about 2023 In the world of compensation.

 

Garry Straker  03:18

Sure. Yeah. I mean, one of the things we saw in 2023 is just more legislative activity, particularly around worker protections. And, you know, certainly I think, I think World of Work coined the phrase that the 2023 was the the year of pay transparency. And of course, we saw lots of new legislation being introduced at the state level, introducing new pay transparency laws, some states went a little bit further than others. And, you know, I thought I think that that trend was going to continue when we would see other states actually pass bills. We know that a lot of bills have been introduced, but not as many states passed them as I thought we were going to see.

 

David Turetsky  03:55

Well, I think one of the ones that that really affects me is Massachusetts. That was kind of held up, isn't it?

 

Garry Straker  04:01

It is, but it looks promising. I think all indications are that Massachusetts, you know, depending on the time, we will probably be the next state to introduce new pay transparency legislation. Everyone expects to see that happen in Massachusetts. And to be honest with you, David, I'm surprised Massachusetts didn't do it sooner.

 

David Turetsky  04:15

Yeah, we'll be too well, and even Colorado, Colorado went a little bit beyond where they had actually originally started, didn't they?

 

Garry Straker  04:22

Yeah, I mean, they introduce, you know, some amendments to their original legislation. One of them that caught my eye was this sort of career progression disclosures, requiring employers to actually provide some visibility and transparency into promotional opportunities and even requiring them to you know, provide information to current employees about new hires came up came on board and and, you know, Illinois introduced some legislation didn't quite go as far but it did have that sort of language in it. And interestingly enough, there was a new directive in in the European Union, which will impact all member states, all 28 members states, again, very much focused on pay transparency, but also introducing that element of career progression disclosure. So keep an eye on that one day, but I think we're gonna see more, you know, perhaps more legislation around it, and certainly more focused on that area from employers.

 

David Turetsky  05:18

Now, you and I both know, because we love doing this kind of work, that looking at career frameworks and looking at job architectures, is actually a really great thing to do anyways. And from a disclosure perspective, it's something that should be part of hygiene about keeping people up to speed between their employee and manager as to where can I go, and how can I grow? So that's not really a bad thing for employers, is it?

 

Garry Straker  05:41

No, I certainly agree, David, and unfortunately, you know, it's a shame that we have to have it legislation introduced around some of these things that we're talking about, which you would have thought just would have been best practice, right, just sort of the, you know, the normal way of sort of doing business, particularly in the area of HR and compensation. But, you know, sometimes organizations are slow to move.

 

David Turetsky  06:04

Let's talk a little bit about some of the other areas of legislation that kind of shocked us, or that may actually be a big shock to organizations like the potential change to FLSA to the the minimum rate on exemption, it's gonna go up by what 30? Grand?

 

Garry Straker  06:19

Yeah, significant jump, if, in fact, it does go through the federal at the federal level, you know, there are proposed rules that do increase that threshold significantly. You know, I think there's a lot of pushback on that from certainly, stakeholders, but we may see that as early as the end of q1, at least some commentators are reporting. So it'll be interesting to see that and how that sort of input, you know, changes things from, you know, in terms of jobs that are considered exempt or non exempt? No, it does make me think that the may may create some salary compression, you know, maybe some organizations will decide just to go ahead and pay that pay that overtime, right, make those jobs eligible for overtime, rather than, you know, create other issues within maybe their job hierarchy or the compensation structure. So certainly keeping our eye on that this year.

 

David Turetsky  07:08

Well, it'll certainly be an expense, or it'll be a difference in how they track people how they track their hours, as well, as you know, how, what's their total compensation? And how did they pay it? So yeah, it's a lot to look at.

 

Garry Straker  07:20

Yeah, as well, you know, David, that that FLSA exempt status, right can be a status thing. For for many, you know, junior level employees who aspire right to further career growth and prospects. And so, you know, taking if you had to take away the exempt status, but for some employees, I think that that would be a hard pill for them to swallow.

 

David Turetsky  07:41

Absolutely. Let's transition a little bit to labor unions, because we actually saw some gains. We actually saw some losses. What what's shocked you about 2023? With with labor? Yeah.

 

Garry Straker  07:50

Yeah, I mean, labor had a moment, didn't they? I mean, we saw some, certainly a lot of media attention and high profile, labor settlement, big salary increases. For a lot of labor unions. Of course, we've seen labor organizing efforts in Starbucks and Amazon. Some have been successful. Some have been held up some unsuccessful, but it certainly, you know, it didn't escape me that unions were, you know, had a high profile year in which, you know, they generated a lot of interest. And there was an article recently that I saw on NPR about the labor union membership did actually increase last year, for the first time in many, many years. I think, private sector, labor, employees and labor unions is down to about 10%. Of course, in the 50s. Right, it was probably closer to 40%. But, but it does seem to be that, you know, unions and the work that they've done in terms of labor protections and salary increases, you know, caught a lot of people's attention last year, it'll be interesting to see how it pans out and what we expect to be sort of, you know, a labor market that just continues to evolve and maybe slowing down all that. Well,

 

David Turetsky  08:57

I mean, we think about inflationary growth that we've gone through over the last couple of years, and now it's died down a little bit, but that hasn't actually impacted wage growth, has it? I mean, because if we look at labor unions, as you said, collective bargaining was really beneficial to those employees, were actually able to potentially get the benefit of that collective bargaining. Do you see that that may have had an impact as well? Yeah,

 

Garry Straker  09:19

I think it's certainly did and certainly expectations that employees had, you know, have been higher than probably some have ever had in their entire careers. I mean, David, you and I've been doing this a long time, the kinds of increases that we saw in 2022 and 23, surpassed anything we saw in the previous 20 years, in terms of average wage increases, and, you know, there are signs that it is cooling, of course, inflation had a lot to do with it, inflation has kind of come down as a result of monetary policy. So, you know, the we certainly did see some pumping of the brakes amongst our clients and certainly heard about that, and I think this year, you know, maybe things will settle back down to the norm sort of, you know, the types of Have wage growth that we historically have seen during the course of our careers.

 

Announcer  10:05

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David Turetsky  10:16

So let's actually do that. Let's transition. Let's talk about 2024. So, if you think about 2024, and where you see things going, what do you think of as the major trends that are going to impact us this year?

 

Garry Straker  10:29

You know, so one of the things that we have to talk about is AI, right, and the impact of AI, of course, that's making media headlines. And, you know, a lot of lot of investment in that area, and a lot of organizations tried to understand how AI can increase productivity and efficiency in the organization. Right, and in some cases, maybe eliminate jobs. You know, I don't profess to be an expert in AI. And like everybody else, I'm sort of sitting on the edge of my seat waiting to see how it all transpires. But certainly in the HR work, the work that we do, if you think to some of the some of the tasks, right, some of the administrative responsibilities that we have in a in HR, you know, things like generating job descriptions, for instance, right, always high on the to do list, but often gets pushed down further down the list as a result of other priorities. And, of course, you know, job descriptions are really a building block or a foundation on which to build a, you know, a compensation program that has integrity, right, that is credits compliant. Yes, that's right. And, and supports, you know, consistent administration of compensation, all those things that we know are important, but, you know, interesting to, it's gonna be interesting to see how AI does change the work that we actually do in HR?

 

David Turetsky  11:42

Well, I'll be honest with you, I've heard a lot of people saying AI is going to take away a lot of jobs, and I gotta be I, I see this parallel to when we started to talk about computers coming into the world of of the organization, right? It's going to take away this job, it's going to take away that job. And, and for many tasks, yes, there are certain jobs that did go away. But to me, AI is just another tool in that toolbox that we use. So for your example of creating a job description, is compensation going to go away? No, they may actually be able to use AI to develop a good job description, of course, they're gonna have to check it. And then they're going to be able to use that as a tool in our toolbox, especially in the next few to me months, slash years, to be able to then hone how they change what they do from being extremely tactical. And then being much more of a consultative, maybe strategic leader. And so to me, AI does impact but especially short term, I don't think the robots are taking off correctly. That's maybe for next next decade or so. But

 

Garry Straker  12:48

Yeah, I think, you know, you make a good point, David, I mean, a lot of the work that the HR, you know, has the task of fulfilling is, you know, it can be sort of repetitive, but some of it is may mundane is often viewed as, you know, administrative or compliance driven. And to the extent that, you know, AI can help sort of take away some of that and take that off the desks of HR professionals so that they can begin to think more strategic, more long term rather than putting out fires every day. I think that's a good thing.

 

David Turetsky  13:20

And we'll see. Yeah, because that's actually not just a 22 or 24 impact that's beyond that, as well. Yeah. Let's talk a little bit about managing labor markets, and especially internal labor markets for 2024.

 

Garry Straker  13:33

Yeah, and this is going to be an interesting year, in terms of the overall labor market dynamics, right. It's evolving, literally as we speak. I mean, there was just a couple of articles in The Wall Street Journal, and last week that talked about how difficult it is for people to move jobs already this year, compared to what it was last year, of course, we heard about the great resignation, right. And people were, it was like musical chairs, and people were moving to get bigger salary increases, and they did successfully. That has changed in a few short months. And now, you know, there's a lot of job seekers who are finding it hard, even though they may have interest in changing their job, they're finding it difficult to find the openings, we know that job openings in terms of what's being posted have been reduced dramatically. So, so the labor market is going to look very different, I think in in 2024. And I think it's going to be important for employers to better manage their internal labor markets, right, you certainly want to keep you know, your rockstars you want to keep the good employees engaged. Most importantly, you want to keep them, you know, within within your organization, rather than have them go go and look elsewhere, because there's a good chance that the ones who will be moving will be the rockstars, right, because they will be the ones who will be most attractive to other prospective employers. So you've got to find a way to keep them engaged. You've got to, you know, continue to sort of develop employees, give them some visibility into career progression, opportunities and growth. Continue to you know, upskill them as best you can.

 

David Turetsky  14:57

And so we were talking a little bit before about career framework marks being able to be utilized to be able to show people where they can go, where they can grow and how they get there. I think one of the things you're talking about in this career progression is being able to show the best people where they can go to flourish. To me, it's also about being able to show the people who need some development, maybe the people who aren't performing as well, maybe look at what they do, and see if there's a better fit for the skills that they have. So that they can perform better, and they can see a different path forward.

 

Garry Straker  15:27

Yeah, you know, I agree, David, I mean, let's face it, there are some, you know, circumstances where an employee may not be succeeding in a particular role, perhaps through no fault of their own, maybe it's just a role has changed, maybe it's, you know, a lack of skills in a certain area. And I think it's incumbent upon employers to sort of recognize that and make sure people are in the right seats, right. And that you can play to their strengths, but also allow them that growth and development opportunity. And I think that that's what's going to keep people engaged. And it's, you know, it's really, ultimately all the work that we do, has has to lead to higher levels of employee engagement, and motivation. And if we're not, you know, if we're not doing that we will be failed.

 

David Turetsky  16:10

One of the ways in which I know some organizations are dealing with this is by looking and doing assessments on people and seeing where the gaps may exist in skills. Can you talk a little bit about the development of skills as being that kind of tool that can be used to kind of judge not only where am I where am I now and my go? And how do I close those gaps?

 

Garry Straker  16:31

Yeah, and I think, you know, we're doing a lot of work in that area, in terms of helping define competencies and skills that may, may be specific to a certain role or certain career paths. And we're seeing a lot of interest in our clients in that area, you know, the trying to sort of build out a job architecture that defines the skills and the competencies that are needed in order to succeed and certain roles. And also, you know, make employees aware of what they need, what they need to do, right, to be able to be successful in those roles, and just creating that little bit more visibility. And I think it really comes into heading of more appropriately managing expectations of your workforce. So that employees, you know, hopefully don't feel as though that there's the stock, that they've had a glass ceiling, that there may be other places in the organization where they can add value.

 

David Turetsky  17:19

But if I'm interpreting what you're saying correctly, then then we need to be more transparent about not just the current framework, but also the descriptions, the possibilities, the skills that are acquired, and being able to arm managers and employees with information that maybe they've never really had before, or they may have never had access to all these things at one time.

 

Garry Straker  17:41

Yet, we have to eliminate the mystery, right? That sort of black box mentality where things happen, but nobody really understands why they happened. What is the rationale? What is the logical reason for, you know, things occurring? Or people moving from one place to another within an organization? But yeah, absolutely. We need to provide visibility, of course, we're doing that in the area of pay transparency, you know, partly being our hand is being forced there as legislation. But I think we need to do that more in terms of that career progression, right, that job architecture, and doing a better job at documenting and communicating differences between roles.

 

David Turetsky  18:16

And that's not really been hrs core suit is giving this information, giving this data out to people. So how does HR kind of do that in a way that they actually probably need to upskill in order to be able to solve for being able to train other people on that, right?

 

Garry Straker  18:32

Yeah and when you kind of think about, you know, trying to build out a job architecture, especially in an environment where maybe you have historically relied upon market pricing. And let's face it, we've talked about this many times today, but there was a time when you and I started this work, we used to spend a lot of time on job evaluation, there used to be methodologies and processes for defining roles within an organization. But we've moved away from that, as a result of, you know, the, the prevalence and availability of market data. And market pricing has been our, you know, predominant method for most organizations of building out those those job hierarchies. And so, I'm not saying we need to go back to the future, but we need to do it in a in a more efficient and an a modern way, right, which reflects the modern work environment and sort of the skill sets and expectations of the modern workforce.

 

David Turetsky  19:20

Well, if I remember correctly, the thing that we're kind of pointing to is something like the Hayes system, which there might be people who are having flashbacks to the 80s and 90s, when I use that terminology, but he's going strong. And it's a framework for being able to do job evaluation that has very strict criteria about knowledge, skills, and abilities, and the ability to measure those things and be able to attribute points to them, and then actually to also be able to attribute market pricing to those points. So it was actually like a good closed end system, but it had, if I may use the term dogma, it had a dogma to it that you had to go through this process. You had to do it the way that it was prescribed, or there became holes in the process.

 

Garry Straker  20:04

Yeah, and and unfortunately, the integrity of those programs was compromised, because people started to game the systems, right, they began to understand that certain words or certain attributes, you know, may result in more points. And so the integrity of those systems, I think, became undermined. And people began to second guess them, and then all of a sudden, they were, they're not serving the purpose that they were designed to serve. So but you know, I think we do need to find a way of doing that work. And again, providing clarity, again, coming back to the hate system and point factor systems, there was a lot of mystery around a lot of confusion around it, there was a binder that sat on a drawer, and it was nobody got to see it, except, except HR. And so, you know, we need to, we need to move away from that and provide, again, the visibility and transparency needed to appropriately manage I think employee expectations.

 

David Turetsky  20:55

And by the way, we're not just picking on hey, I mean, but now you can apply that same exact terminology or thought process you just described, to pretty much every job evaluation methodology that was very static.

 

Garry Straker  21:07

Yeah, and organizations have to find the right solution that works for them. Right, given the complexity of their organization, and the kind of roles that they have. And I, I don't know that there's a one size fits all, I don't think there is a one size fits all. And so every organization, you know, is built differently is designed differently, they have different culture and values and, and how they define roles in the organization. So they have to find something that works for them. The importance is it has to be administered consistently, right? And you need to have appropriate documentation, transparency, and consistency. And if you don't have those things, you're going to be in for a rough ride.

 

David Turetsky  21:40

Oh my gosh, just because you're gonna get people saying, hey, wait a minute. What about that job? Or what about that person over there? They're this and it's a mess. Yeah. Yeah. So Gary, let's talk a little bit about some words that were used a lot in 2023. We haven't heard about the much in 2024, yet, quiet quitting, what's going on with quitting? And, you know, is it louder now? Or?

 

Garry Straker  22:02

Yeah, I mean, it's not unrelated. The point I made earlier about the difficulty, the number of job openings, right, that have been close, that is diminished, right. So employees are having a more difficult time to move out of their current role, if, in fact, they're dissatisfied. And so, you know, I think that that's going to continue into 2024. And it comes back to making sure that people are engaged and motivated, right. So we need to have the systems and processes in place to make sure that if people are underperforming, for whatever reason, maybe they become disenchanted, or maybe they no longer feel as though that their job is a good fit for them. We need to have the systems and processes in place to be able to identify that and address it quickly. Because there's nothing worse than having, you know, a demoralized employee or working amongst a team of highly motivated employees, right, who's not being treated any different, right, who's not sort of being called out for that. And I think, you know, when it comes to performance management systems, everyone has challenges in that area. But I think one of the most important things that performance management systems need to do is appropriately address underperformance. You know, we can always talk about dealing with high performance. But if you're not dealing with underperformance effectively, again, you're I think creating a negative impact in the overall environment and potentially others in the workforce.

 

David Turetsky  23:17

And again, it may not be I think we've made this point before it's not, it's probably not their problem necessarily may not be their problem, they may not have the skills necessary to do what's needed, or there's an environmental issue and career progression or career frameworks might actually help them by putting them in a better situation where they could be a star, that's fine. Being able to support the employee who might be struggling, who might have opportunities, and then find those opportunities inside might be a benefit to everybody.

 

Garry Straker  23:46

Yeah, I agree, David, and I hope I'm not being naive, but I think everyone has the ability to be able to be successful, right, in some role. Now, it's not sometimes, you know, it may take a little little bit of time to find the right role. But I, you know, I believe in people and people want to, you know, be energized and motivated and engaged, they want to feel as though they're doing meaningful work. And sometimes, you know, they might not be sitting in the right seat. And so it's our job as HR professionals, again, coming back to managing your internal labor market, let's find the right fit within our organization, and see if we can improve upon that.

 

David Turetsky  24:18

Yeah, we saw something in them when we hired them, right? We brought them into the organization for a reason. Yep. Is there really a reason to get rid of them? Or could we try and rescale them or find them a better fit? So I agree. Yeah. And by the way, you're not being naive. I think I feel the same exact way as you were, I have hope that we might be able to find a role for somebody who might be struggling. Yeah. So by the way, I just wanted to mention that if you have any questions, just feel free to use the q&a, and we'll try and address them along the way. But in the meantime, let's go to question three. This is a cool one. Hey, are you listening to this and thinking to yourself, Man, I wish I could talk to David about this. Well, you're in luck. We have a special offer for our listeners. So the HR data labs podcast, a free half hour call with me about any of the topics we cover on the podcast or whatever is on your mind, go to Salary.com forward slash H R DL consulting, to schedule your FREE 30 minute call today. So if anybody remembers the Tonight Show with Johnny Carson, he used to put on a hat. And he used to pretend he was Carnac. And Carnac was a seer. And he had these hermetically sealed envelopes of suggestions that he wrote down at some point in the past, and it's talking about what's gonna happen in the future. So if you put on your current cat, Gary, yes. Do you see things happening beyond 24? into 25?

 

Garry Straker  25:43

Well, yeah, so Well, of course, this is a big year in terms of the election. And so you know, it's gonna be painful to sit through the next, you know, 10 months or so till we get through the limb on everybody. So we're gonna have to get through that. And sort of, you know, what comes out on the other side that may, you know, may change things in terms of some of the things we've already been talking about. And, you know, certainly, if you look at, you know, the Democratic Party, they're all about pro labor, right, and encouraging further labor, labor growth and development, I'm not quite sure a change in administration is going to feel the same way about that. So, you know, that may change just in terms of some of the legislation, you know, that we've seen floating around as it relates to worker protections, but but I, you know, the economy, you know, is probably still going to chug along and do what it does, right. And so the labor market, we've already seen signs of a cooling, I don't really, you know, I think we're probably going to see a cooling in 2024, once we get into 2025, maybe we'll get over the hump. And, you know, maybe there'll be more opportunities in the economy, more more job openings, and maybe a little bit more movement, coming back to what we've seen, you know, probably not so much as we've seen in the last couple of years, but maybe increase from its from its current state. So, you know, it's always difficult to look out that far ahead. I still think and maintain that. Organizations are going to have to do better at managing their internal labor markets, regardless of what happens externally. And, and I think putting more emphasis on, you know, making sure employees are engaged and motivated and successful in their roles is, is something that's not going to go away.

 

David Turetsky  27:29

I think one of the other things that we typically see in the kind of election year that we're in, is we see things stabilize from a price perspective. So we shouldn't expect or who knows, but we shouldn't expect gas prices to go through the roof and then have a ripple effect on the economy like it did a couple of years ago. We're actually just starting to see I just filled up my tank a couple of days ago, and we almost saw a $2 high $2 gas. Well, we haven't seen that in years. Yeah. So, you know, one of the bits of good news is that kind of stabilizes prices. So that might mean, I think it was to your point inflation stabilizes for that period. Yeah. And then we're not dealing with that wage pressure that we had the last couple of years.

 

Garry Straker  28:12

Yeah, it would surprise me if we see going into 2025. And beyond any kinds of wage growth that we experienced in 2022. And 23, I, you know, things I think are probably will revert to the main right. And so for years, I mean, you know, if organizations were typically budgeting around 3%, okay, there was some years when, you know, maybe it was less than 3%. But, you know, you can go back many years and see that now, 3% was more or less the number. And so I would expect things to, you know, once we get out of 2024, it's gonna be a little bit of a bumpy year, I think there's there's some uncertainty for a whole host of reasons. But hopefully, looking beyond that things will settle down, and we'll see things sort of revert to the norm in terms of the labor market, and what we see in terms of wage growth.

 

David Turetsky  28:56

And just so everybody knows, when we're talking about, you know, 2025, and beyond potentially getting back to the threes, you know, the extraordinary length that we had to go through to convince people that salary increases or salary budgets, at least, we're going to be higher than 3%. That kind of was taken out of our hands, because inflationary pressures were up in the eight high eights even beyond. And people were saying, Well, why aren't they more? Well, but those of you don't know, wage pressures are more about cost of labor than they are about cost of living. And so when you start to see inflation rise only to the extent at which that affects the cost of labor. Do you get those increases in those very large increases in in your merit budgets? So I guess, Gary, I'm just interpreting I'd love your interpretation. But getting back to the norm, as you said, getting back free is probably because that's where we've seen the cost of labor for many, many years. Right?

 

Garry Straker  29:54

That's right. It's gonna be a function of the labor market. And certainly the cost of labor you know, isn't disconnected from the cost cost of living, of course, but, you know, obviously, we've seen moderation the cost of living and cost of labor will follow suit. So, and I, you know, I don't necessarily think it's such a bad thing, right. I mean, I think employees still have an opportunity to, to see growth potential in their income, hopefully they see growth potential in terms of their career development, right, if we, if we're doing our work successfully. And I think it's just gonna be a little bit easier to sort of manage compensation and sort of HR generally. I mean, we've, you know, we had to take sort of a leap of faith in 2022, and 23. And to a certain standard, we were shooting from the hip and time's right, because we just, we just didn't know, right, and, but, uh, hopefully things will, will kind of settle down. And we can kind of move into a more consistent pattern of how we have historically administered compensation.

 

David Turetsky  30:49

And we definitely saw when the surveys came out, and companies were telling us what their service salary budgets were looking like, in the, you know, in the 2023, 2024 timeframes, we saw a market move from the beginning of 2023, to the middle and end of 2023, in terms of how companies were actually going to push their budgets higher. And so, and somebody asked a question about going into the kind of the definition of cost of labor, and how is it relative to merit, increase budgets? Think about it this way, if you're having a hard time hiring, and you're losing people, and you're seeing that increasing rates are happening around you, whether it's for just starting rates, whether it's for experienced hires or whatnot, you then have to start thinking about how do you increase pay in order to be able to sustain where you are in terms of your labor, your current book of labor, but then also when you start hiring, too. And so companies work, HR and finance work together to figure out what's the right level for not just America budgets, but for your salary structures? And how does that change how we recruit has changed how we will reward? Gary, how do you react to that question as well?

 

Garry Straker  32:02

Yeah, I mean, I think, you know, industry sector could also play a role in that, you know, of course, what you know, where we're seeing sort of the wage growth and more job postings nowadays is in hospitality, leisure, healthcare, for instance, there are other sectors. Yeah, and not so much. We are seeing layoffs, significant layoffs, obviously, the tech sector sector comes to mind. So, you know, I think you've got to continue to sort of monitor the situation and look at your recruitment and retention, you know, goals and needs and, and adjust accordingly. But it may be that certain industry sectors are going to have to do more than others. So certainly not going to be, you know, even across the board is what I would expect. Right?

 

David Turetsky  32:42

Absolutely. Gary, let's talk a little bit about some of the other areas and 2025 Putting your hat back on. I'll use the words while use the initials AI. How do we see artificial intelligence moving beyond? Beyond 2024?

 

Garry Straker  32:57

Yeah, yeah, you know, listen, if I had a crystal ball, and I could look into the future, I'd be I wouldn't be here I'd be I'd be doing something else.

 

David Turetsky  33:06

But you would have bought Amazon from the beginning. There you go.

 

Garry Straker  33:09

There you go. Yeah, I listen, it's gonna be a part of our lives. Right. And it's, I think that there's a place for it, certainly in the work that we do in HR and potentially compensation. And, like everybody else, I'm not exactly sure how all that's going to transpire. But I think we have to be prepared to embrace it. I have to tell you, when chat GPT first came out, I was a little skeptical, right. And so I went online and did probably like what a lot of other people did, and sort of, you know, plugged in a couple of questions here and there to see what see what the response was. But, you know, those early, you know, experiments with Chad GBT, you know, probably did I wasn't overwhelmed by them. Right? But it's, it's, it's going to continue to improve and get better. And I think how we leverage AI in the workplace, you will remains to be seen, but I think we need to keep our minds and eyes open, right, we need to be prepared for trying to look for opportunities when we can hopefully improve productivity and efficient efficiency and use it in the best possible way.

 

David Turetsky  34:08

So there's a reason why there's a job called a prompt engineer, which is a brand new job. And that prompt engineers getting paid a lot of money. And it's because AI needs us to learn how to deal with it, because we have to get trained on how to be able to ask the right questions. So as we start building into what we do, not only will the technology be better, but will be better. It's kind of like asking that, that a name that on the Apple iPhone, and the name on Amazon, because if I if I say it, she'll answer and asking it a question that you know, it can answer like what time of day it is, or, you know, what's the weather, what you start to try and ask much more complex compound questions. It struggles because we don't know what the capabilities are necessarily, because we're still in that mindset of ask. It's something simple, and it's the same thing with with the current generative AI unless you're trained like those prompt engineers, to be able to really focus on what the business problem is, and solve it in that right way, we're not going to be there yet. And that's why that's a business problem right now. And it's going to become a consumer problem at some point, but not yet. So I'm with you. But I think one of the areas that we might want to talk about is the potential legislation around AI that might actually take it into completely, or or at least delay it from actually being more widely used. Right.

 

Garry Straker  35:30

Yeah, I mean, certainly, you know, the abuses that we've already seen, I've been hearing about it, you know, that they need to be curtailed in some way. And so I think our politicians are sort of wrestling with how you know how best to do that, how can we achieve it without inhibiting the potential opportunities for leveraging this, this technology, and, you know, I don't really know what direction that is going to go in. But there are certainly lots of different ways in which AI is open to abuse. And, and I think we have to, we have to get our arms around that. And certainly, there's a lot of people, people a lot smarter than myself, who are trying to figure out how best to do that. And I think they're, they're struggling with it, they're wrestling with it. Because partly, they don't really understand and maybe the technology is just, you know, we haven't really got our arms around the full capabilities. And you know, and maybe some of the, you know, the downside of this, this technology and, and how it can be disruptive to individuals, right, and people and their lives.

 

David Turetsky  36:29

I mean, you don't have to be talking about movies, where AI is the center of the movie and has become evil, we actually just saw within, I think it was the New Hampshire primary, where there were deep fake, not only videos, but deep fake robo calls that were made, and in a very nasty way, and it's all pointed at AI, as you know, artificial intelligence do well, you know, programmers have been doing this for a long time. audio engineers have been doing this for a long time. It's just much easier now.

 

Garry Straker  36:55

Yeah. And so I, you know, I'm hoping that, you know, it I, I'm seeing it as an opportunity, right, and I'm trying to sort of stay positive and look for, you know, the, the I think the potential for how it can enhance, you know, my certainly my work life, maybe my my personal life, too. But that remains to be seen, but I'm hopeful.

 

David Turetsky  37:16

But you can ask Netflix, what movie you should watch, and that AI is pretty benign, unless it suggests a horror movie and you can't sleep.

 

Garry Straker  37:24

Yeah, that's not my job. And so yeah, not mine, either. Yeah.

 

David Turetsky  37:28

So we actually did have a question that somebody asked, Do you have a recommendation on the average percentile company's hiring should be paying in an effort to be competitive and acquire top talent in today's market? Wow, that's a good one.

 

Garry Straker  37:41

Yah, it is a good one. And let me take a stab at this. And you can certainly chime in. But you know, we know that most organizations are focusing on the median of the market as a market reference target, and most of trying to align a compensation, philosophy and policies around paying to the median in the market. But of course, you know, there's always exceptions to the role. And, you know, we already talked about some of the industries where the labor market continues to be untied, and there are shortages. And so, you know, I think there are times when you might have to rethink that a little bit. But, you know, and I think, you know, one of the big issues that we're seeing, just in terms of how we pay new hires is just this, again, more pay transparency, and you also have to consider how you're paying new hires relative to your existing employees, right. And so internal equity, that's right, and so you can't deviate so much from you know, what you're paying your current employees without potentially creating concerns or issues from a pay equity perspective, or just a, you know, an internal equity issue. So we have to, we have to look at this, I think pretty broadly and comprehensively to make sure that we're not creating problems in other areas of the organization just to be able to sort of recruit and be prepared to be flexible.

 

David Turetsky  38:56

I'll say that I love your answer. Let me ask the answer a little bit differently. And let me say that different industries certainly pay differently and will target differently. And so if you're looking at survey data that specifically of your industry, one of the things you have to ask, especially for your finance department is are we laggards? Are we leaders? Where do we fit in this world? Right? Where does our performance lie? And does that meet what we should be doing as far as a compensation philosophy? Because if you're laggards and you can tell your shareholders, we're going to be leaders and pay. They're gonna ask you will whoa, wait. Yeah, right. So you definitely have to have that risk reward methodology. Yeah, I like having maybe our total direct compensation be 75th percentile. Yep. But maybe it's because your base pay is at the 25th. And you're making it up with short and long term incentives that incentivize growth and performance.

 

Garry Straker  39:53

Absolutely. David, I mean, the sustainability is important, right. And we have to understand the implications in terms of Sustainability. And so there may be other ways in which we have to sort of strengthen our value proposition through, you know, maybe there's other parts of the compensation mix, whether or not it's benefits or PTO or more, you know, work from home flexibility, whatever it is, sometimes money isn't always the answer. But you know, sometimes it can be challenging. And so I think you've got to be able to step back and look at it holistically. Right,

 

David Turetsky  40:22

Great. Well, Gary, I don't see any more questions. Is there anything you want to kind of round out from what shocked you what what did you think might have happened last year, this year? And in the future? What What are things that surprised you? That didn't happen?

 

Garry Straker  40:35

You know, I guess one of the things that I often I'm surprised about, and necessarily true when I talk to clients or prospects is this whole, you know, performance, merit based pay discussion or conversations, and, particularly when you get into, you know, a very tight labor market and, you know, trying to sort of manage budgets. And, and we know that, you know, once you build compensate a large increase into base salary, you're stuck with it, you've inherited that for the lifetime of that employee. So I was a little bit surprised that we didn't see more focus on incentive base pay linked to performance, right? Because I think if you're, if you're struggling to sort of keep pace with what we saw, you know, high base salary increases, but provided some upside potential, hopefully a leveraged upside potential based on performance, then maybe you've you've closed that gap a little bit without committing yourself to those increases in future years. A little bit surprised about that? I, I always think that's a challenge for organizations to get that right. But, you know, um, maybe we'll see more of it in the future.

 

David Turetsky  41:43

I agree with you on that. We actually just got two more questions. And Gary will try to hit them when we close. So one person said, how do you back down from incentivizing from COVID without losing employees? And I think you kind of touched on it a little bit about, about building things into base versus keeping things separate. So it doesn't become part of your fixed pay, right.

 

Garry Straker  42:04

Yeah, I think so. I'm not quite sure I fully understood the question as it relates to COVID.

 

David Turetsky  42:09

Well, I mean, remember, there were certain things that were provided to people, there were certain pay elements, and certain, I don't know if it was an incentive or not, maybe the person can clarify. But to me, there were certain things that were given as part of Oh, yeah. Okay, we got it. Now, takeaways are going to be tough to to, you know, take them away from people.

 

Garry Straker  42:27

Yeah, we certainly did, you know, go probably a little bit further and trying to keep our employees happy, right. And so we might have done that through either spot bonuses, or, you know, work at home flexibility, or whatever else we did to sort of keep employees engaged and motivated. And yeah, so, you know, backing back down from that, and beginning to take things away, always hard to do, right, very difficult to sort of give something to an employee. And but I, you know, I think it really kind of boils down to your role compensation philosophy, and being clear, and articulating what your philosophy is, appropriately, managing expectations, and managing the narrative, right, so, so don't let employees or anyone else for that matter, begin to create misperceptions about pay and what your intention is or what you're actually doing. You've got to be able to control that narrative, and be clear about it, about what your intent what your expectations are, and perhaps even what your aspirations may be. Because you may not be able to do everything that you'd like to do. But hopefully, there's, you know, the, there's maybe a roadmap for being able to make improvements further down the road.

 

David Turetsky  43:34

I agree. And let me just put a finer point on it. Be clear about what a pale Mint is for, if you're giving an award to cover for, you know, child care, you know, from COVID, or whatever it was, be clear, it's for that timeframe. Because if you're if it's not clear, and now you're going to take something away. How do you explain that? So I like regardless going no, I think we're good on that. Let's talk about the next one. This is actually a really cool, we haven't touched on this. And this is a neat one. Do you have any thoughts on companies returning from defined benefit versus 401k?

 

Garry Straker  44:08

Yeah, you know, World of pension, remember that

 

David Turetsky  44:12

Those guys still have a pension from one of my employees. Okay. Yeah.

 

Garry Straker  44:17

Yeah, I mean, of course, you know, unfunded pension liability was a real drag on a lot of organizations. And so, you know, organizations moved away from that and move to a defined contribution model. We are starting to see some organizations who are reintroducing defined benefit plans. I have heard a little bit of noise about that. I don't think it's, you know, broad, you know, broadly used in the marketplace yet, but, you know, I think a lot of it comes down to providing security and demonstrating a commitment to your employees. And I think every organization has to be able to do that. Of course, a lot may depend on you know, what is in terms of your workforce. Is it a transitionary workforce, is there a lot of turnover? You know, how How much responsibility do you want to take for someone who would if your average tenure was only, let's say, three or four years and people are moving on? Does that make sense? So, again, I understand the question, I certainly understand from an employee perspective how that might be attractive. Right. But I think you've got to you gotta do a lot of work to determine whether or not that is that is feasible, and something that really helps your business in the long run.

 

David Turetsky  45:24

Yeah, let me also add demographics matter, right? I don't know if every age group will value the defined benefit plan the same way they would have 401k. Because the 401k usually has much more control by the individual. Right. And I'm think I'm right in saying that, Gary, you know, you can direct your funds, you are the you are the people who are the owners of those funds, once they become vested, whereas with a pension, it's just sitting behind a wall, and you think it's gonna be there, you're hoping it's gonna be there when you're ready for it? Or be contractually, we have some more questions, I'm not sure we're gonna be able to get to all of them. So what I suggest we do, because I think we're running out of time. Right, Megan? We are about three minutes over. All right, so let's try and take a couple more questions, guys, we're gonna have to keep them short. Okay, given that more employees are able to be full time teleworkers, what are you seeing how companies are handling? Geographic differential is a great one. Yeah, right. Is there a typical percent that companies are targeting between geographic tiers and number of geographic tiers?

 

Garry Straker  46:25

Yeah, and so we're certainly seeing amongst our clients more interest in introducing geographic cost of labor differentials, you know, coming back to what David said earlier about the pandemic, you know, when we just wanted to keep our workforce employed, right. And so we did whatever we needed to do. But I think, you know, we're starting to see hybrid models nowadays, people are sort of stepping back from some of the things that were done as a result of the pandemic. And we are starting to see more interested in leveraging, utilizing geographic cost of labor differences, those organizations that are doing it, and I think two thirds of organizations either have or are planning to do it based on some of the studies I've seen from world of work. But but but those organizations that are doing it, or are sort of creating pay market tiers, so again, if you have a distributed workforce across 50, states, you know, you can easily sort of group, you know, a number of tiers, right to reflect the cost of labor in those various pay markets. The key is, you know, don't make it administratively overburdened site, keep it simple. And, again, you have to figure out what works best for your business in terms of recruiting and retention. But now, a lot of employers are doing it.

 

David Turetsky  47:29

And what I've done it, I've tried to stay as little as possible, I've done for two years, and made those very wide swaths of percent up percent down. So that it is, you know, to your point, I'd love your point, it is not an administrative burden. We can't cover up on all of these questions. So my suggestion is, if you guys go to Salary.com, and go to our the consulting page, you can actually schedule time with Gary or myself. And we give away free half hours to solve some of your problems, or to talk about how we might be able to help you. So I would go to Salary.com to the consulting page. And if you want more answers than we can give you today, please go there. Gary, thank you very much. You're always a pleasure to have on.

 

Garry Straker  48:18

David, thank you so much. Always enjoy spending time with you and enjoy being part of your podcast. Thanks for having me.

 

David Turetsky  48:24

Thank you for joining in. And thank you all for sticking around and listening. And for those of you who want a replay of this, we'll have it on the HR Data Labs podcast, which is also on the Salary.com website shortly. Thank you so much. Take care and stay safe.

 

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