The new lever in compensation: crowdsourced pay

October 16, 2019 Sarah Payne

3-minute read

“In HR, we have enough bureaucracy,” said Chris French, Workhuman® executive vice president of customer strategy, at the Workhuman Executive Forum in Boston last week. He continued: “We have enough systems to control processes, track what people are doing, how much we’re paying them. We spend a lot of time thinking about controls and systems and putting people into buckets.”

Do you agree with Chris? In HR, are we challenging the status quo enough? Are we doing all we can to treat people as humans and not resources?

As an antidote to bureaucracy and a way to empower employees, Chris introduced the concept of crowdsourced pay – a new lever in compensation. The way most companies compensate and reward employees today is a top-down, bureaucratic process. HR and finance agree on a certain percentage each employee will receive for a merit increase or bonus, which appears in their paycheck once a year.

But as a business, what do you get in return for this standard 2-3% merit increase or 10-20% annual bonus? “Expectation,” answered one audience member.

Employees come to expect these annual pay actions. And the problem is, no matter how much an employee receives for that one-time pay action – whether merit increase, retention bonus, or annual bonus – the lift in energy and engagement only lasts about 3-4 weeks.

So, what do companies end up using as a lever to keep employees engaged for the other 48 weeks of the year? Chris mentioned the “arms race” of perks in Silicon Valley. (One example: Some companies are even offering complimentary storage for employees’ umbilical cord blood.) Many companies rely on retention bonuses, which one thought leader calls a “paid form of servitude.” Neither of these options does anything to increase feelings of connection, belonging, or psychological safety for employees.

For just a penny on the payroll dollar, crowdsourced pay is the lever many top companies are using to keep employees lifted throughout the year. Chris explained how taking 1% of payroll to fund a social recognition program empowers people to recognize each other with messages of gratitude and micro-bonuses for good work.

This isn’t another “feel good” HR program. A well-funded recognition program is proven to have a profound impact on retention, engagement, safety, and so many other metrics. He referenced several examples of Workhuman customers with best-in-class recognition programs, including Cisco, which was just named a top place to work.

Does this kind of program work across different organizational levels or industries? “Data from 40 million of these moments over the last 15 years says ‘yes.’ It doesn't matter what level you are or what industry you’re in. It works with nurses. It works with highly paid executives. It works in a company like Procter & Gamble that has all kinds of different employees in more than 100 countries, because all these people are human beings,” said Chris.

Human beings long to be appreciated. Companies are also realizing that traditional compensation and benefits, which operate strictly on an annual cycle, do not match the way work actually gets done in a modern organization. Managers might only see a small piece of the work their team does on a day-to-day basis. Many of us work in teams that might only collaborate for a specified time period. Now there’s a more personal, human way to reward this teamwork in the moment – for just a penny on the dollar.

Is your company ready for crowdsourced pay?

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About the Author

Sarah Payne

Sarah is managing editor at Workhuman. When not writing about all things culture, leadership, recognition, and appreciation, she enjoys iced coffee, running, and spending time with her daughter, Mabel.

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