Understanding Current Trends in Employee Compensation

The Compensation Profession Is Changing. Are You Ready? Ten years ago, compensation was largely a back-office function: lots of spreadsheets, unorganized old job descriptions, static salary surveys published once a year, and a lot of pay data analysis that took time complete and even more time and employees to summarize in PowerPoint. Technology has changed everything. Modern comp teams are no longer data wranglers. They are pay data strategists. Survey data is now integrated, interactive, and real-time. AI-powered tools surface insights on labor market shifts, peer benchmarking, and internal pay equity risks instantly. Job evaluation and job leveling approaches that once took weeks are now automated and adaptive. Job architectures are dynamic, global, and tech-enabled, allowing organizations to scale with clarity. And pay communications? They’ve gone from taboo to table stakes with tools that personalize total comp statements for employees. Laws and expectations have shifted fast. In the U.S., pay equity audits are no longer optional. State laws from California to New York now mandate transparency in job postings, salary ranges, and internal processes. Globally, the EU Pay Transparency Directive will push even multinational holdouts to publish gender pay gaps and provide justifications for pay differences. This regulatory wave is forcing comp leaders to integrate equity and reporting into the program design and pay decision making processes. The workplace has changed, and it is not done. Hybrid work, remote-first organizations, and purpose-driven employers have made rigid compensation structures obsolete. Location-based pay? Being reconsidered and adapted to employee and employer needs. Standard annual pay increases? Replaced by more frequent, data-driven market/equity adjustments. Employees today want to understand how they’re paid, why they’re paid that way, and how to grow their careers. As HR and comp leaders we must deliver answers to be trusted and to have the right impact. So, what’s next? The next 10 years will demand greater pay transparency, agility, data insights, and storytelling. Compensation will move from slow-moving data reporting and compliance function to a strategic driver of talent attraction, retention, and productivity. AI will help, but it won’t replace business acumen, context, and judgment. Compensation professionals who thrive will be those who can marry technology with strategy, analytics with empathy, and decision making with storytelling. It’s no longer just about “how much we pay.” It is about how we decide, how we explain, and how we adapt quickly. Are you ready for the next decade of compensation? What are your predictions for the future? #Compensation #HR #PayTransparency #TotalRewards #JobArchitecture #PayEquity #FutureOfWork #WorldatWork #CompensationConsultant #HumanResources #SHRM #Incentives #JobEvaluation #FairPay https://shorturl.at/Iuk4G

The labor market from 2019 - 2024 has been complete chaos. Here's what it has looked like from the POV of a compensation leader: 📉 Market Chaos. → 2019 SaaS Gold Rush → 2020 Covid Black Swan Days → 2020/2021 ZIRP Froth → Inflation Spike → High Interest Rates  → 2022/2023 “SaaScession” → First Innings of the AI Boom 🏢 Covid-Induced Office Culture Chaos. → 5 Days/Week In Office → Fully Remote Overnight → Rapid Globalization of the Workforce → Return to Office Wave ⚖️ Compensation Legislative Chaos. I'd call out the Pay Transparency Wave in the USA and DEI Reporting Requirements in Europe. Some good news–chaos and scarcity inspire innovation, and the pressures of rapid innovation create diamonds. We are in the early innings of a “CompTech” boom. And traditional compensation philosophy is being challenged and redesigned at faster rates than we’ve ever seen. __________________ Pave's data team (shoutout Frances Mitchell) recently collaborated with Redpoint (shoutout Atli Thorkelsson) to produce the 2024 State of Talent Report: https://lnkd.in/gadi-FjE 5 takeaways: 1️⃣ Merit cycle freezes are becoming normalized. The number of companies simply skipping company-wide merit cycles altogether roughly doubled from 2022 to 2023. 2️⃣ The 4 year vest is dying. There has been a surge in popularity of shorter vesting schedules as companies look to 1) curtail high dilution rates while meanwhile 2) saving optionality to more disproportionately invest in the highest performing employees over time. 3️⃣ AI/ML engineer compensation is a tale of two cities. Some AI/ML engineers are bringing home 7 figure comp packages from the minority of outliers (e.g. OpenAI). Meanwhile, the rest of the market for AI/ML is hot but not by an order of magnitude; we’re currently seeing a ~7-8% premium for the AI/ML job family over the Software Engineering Generalist job family. This said, I do expect the demand and compensation premium for AI/ML talent to increase over time. 4️⃣ AI Disrupting Other Job Families. The roles, responsibilities, and compensation outcomes for job families including Sales, Customer Support, and parts of Marketing are evolving before our eyes. Meanwhile, for software engineering, AI currently seems to be more of a developer productivity enhancer rather than a talent disrupter. As David Singleton, CTO of Stripe, puts it, AI will allow engineers to “bend computer systems to their will in order to solve business problems”. 5️⃣ Equity Participation is Decreasing. Companies are no longer just giving equity haphazardly to 100% of candidates and employees. Instead, they are focusing on giving equity to the most leveraged subsets of their talent base–top performers, the job families that value equity the most, and the locations most congruent culturally and legislatively with equity compensation as a retention tool. For a deeper dive into the insights, check out the full report (linked above). #pave #redpoint

I've seen the future of pay. AI, predictive analytics, and skills data reshape pay structures in 2025. Here’s how these technologies are changing compensation management: 1) AI-driven Pay Scales • AI analyzes market trends and internal data to set competitive pay rates. • Companies use AI to ensure fairness and reduce pay gaps. 2) Predictive Analytics for Raises • Predictive analytics forecast employee performance and potential. • Managers use these insights to make data-driven decisions on raises and promotions. 3) Skills-based Compensation • Pay gets increasingly tied to specific skills and competencies. • Employees are rewarded for acquiring new, in-demand skills. 4) Real-time Pay Adjustments • AI enables real-time adjustments based on performance and market conditions. • Employees see immediate rewards for their contributions. 5) Personalized Pay Structures • Compensation packages are tailored to individual needs and preferences. • Employees can choose between different rewards, like bonuses or benefits. 6) Transparent Compensation Models • AI and analytics provide transparency in how pay is determined. • Employees understand the factors influencing their compensation. 7) Enhanced Employee Engagement • Fair and transparent pay structures boost employee morale and engagement. • Companies see higher retention rates and job satisfaction. 8) Data-driven Equity • Analytics identify and address pay disparities across the organization. • Companies commit to equitable pay practices. 9) Performance-based Bonuses • AI tracks performance metrics to allocate bonuses accurately. • Employees are motivated to excel and contribute to company goals. 10) Future-proofing Compensation • Companies stay ahead of market trends and adapt to changing demands. • Employees benefit from a forward-thinking approach to pay. 2025 is the year compensation evolves. Stay ahead by embracing AI, predictive analytics, and skills data. Remember, the market moves. Do you?