It can be tricky to create a strong compensation package these days.
Gym memberships and end-of-year bonuses used to be enough to please workers. But the past few years has seen a salary reckoning and increased wages for employees across the U.S. And a new generation of staffers is bringing higher expectations about the kind of perks their workplace should offer.
“I think that the pandemic highlighted for employees what the employer could provide them,” says Pattie Gould, global head of total rewards at Citi.
Fortune spoke with five compensation practitioners and experts to create a list of the new non-negotiables when it comes to putting together the perfect pay package that will attract and retain workers. Mental health perks, financial wellness benefits, and child care subsidies are all on the list, but it’s important to keep the big picture in perspective, and remember that paychecks are still number one.
"Companies and managers need to be prepared to have these important discussions with their people," Tanya Moore, CPO of West Monroe, a digital services firm, tells Fortune. "At the end of the day, the basics are still in place. But the dynamics have evolved a bit."
Salary is most important—and so is transparency
Perks and benefits are critical, but salary is still the most important aspect of a compensation package.
After a period of pandemic-era wage hikes, power has swung back into the hands of hiring managers. But a majority of CFOs are still planning to spend more on average compensation this year, according to a 2024 survey from Gartner. And about 71% of those planned pay increases outpace the rate of inflation this year.
Fair compensation is the top driver of loyalty for long-standing workers, according to a 2024 study from cloud-based software company Workday. Ensuring adequate pay is also critical to employee engagement, retention, and happiness—especially since 44% of full-time American workers don’t make enough to cover their family’s basic needs.
Business leaders and CHROs should check if the salary for specific jobs is roughly in line with the industry average, Ron Seifert, workforce reward and benefits leader at Korn Ferry, a management consulting firm, tells Fortune. But among large competing companies, lofty base pay is already an expectation, and compensation strategy should be more robust than that.
“You have to pay competitively, but that's table stakes. You really [need to] understand how to differentiate yourself from a benefits perspective as well as the other parts of compensation,” Seifert says.
Salary transparency is also a must-have for employers now. Not only is it legally required in several states, but younger generations are distinctly more open about sharing how much they make. Platforms like Glassdoor also allow employees to anonymously review and share their employment experiences, and TikTok can be used to put bad bosses on blast.
“There's a very important realization that employers need to have, that they are being viewed as people and they're being judged based on their actions,” Natalie Lupiani, VP of BSG, a management consulting company, tells Fortune. “So without a clear effort towards honesty and transparency, you are not building trust.”
Child and caregiving assistance
Financial assistance for family planning is also an incredibly popular perk, and becoming an expectation within the benefits and compensation landscape.
Raising children in America costs a lot of money. The price of taking care of kids is higher than the average price of rent in all 50 U.S. states, according to a 2024 report from non-profit Child Care Aware of America. The U.S. also lacks a federal paid parental leave policy, leaving it up to states and individual employers to create their own rules.
“Employers need to offer parental leave and urge employees of both genders to use it as appropriate. Daycare is expensive, the cost of raising kids is high and increasing every year,” says Lupiani. “And I say parental leave and not maternal leave, because we can't continue to suggest that it's just a woman's responsibility.”
But caregiving isn't just about children—it can mean adults as well. Gould points out that Gen X staffers in particular are part of the “sandwich generation,” tasked with supporting both kids and elderly parents. “That's where caregiving and elder care have really started to evolve,” she says. “The responsibilities of employees differ through all those different stages.”
Workplace benefits in this area can include child and caregiving subsidies, covering fertility procedures like IVF, and in-house nannying services. Increased flexibility around work schedules can also be critical.
Mental health perks
The global workforce is grappling with widespread mental health challenges, and benefits need to address that.
There was a 74% surge in employees requesting leave or accommodations for mental health-related issues over the past year, according to a 2024 report from Littler, an employment and labor law company. And around 22% of workers say they’ve been concerned that a colleague would “harm themselves” or “take their own life,” according to a 2024 report from Wysa, a mental health company. Gen Z and young millennial employees in particular are struggling—a 2024 UK study found that workers under the age of 30 miss the equivalent of a day’s work every week due to mental health issues.
Employers are generally aware of this trend, and adding new benefits to address it. Around 23% of workers say that their employer introduced new mental health services during the pandemic, according to a 2022 survey from the Harris Poll on behalf of Fortune. And 93% of organizations say that they provide resources and benefits to address mental health, according to a 2024 report from One Mind at Work, a mental health nonprofit.
“We've seen an increase in offerings around wellness,” says Moore. “Wellness wasn't about your physical shape, it was actually about your emotional state and your psychological state. We started to redefine what we meant by ‘We care for employees.’”
Seifert notes that mental health offerings and an increased openness around that topic have become so normalized since 2020 that it’s now standard in employee benefit packages. “The stigma has gone down, people are willing to talk about it. They're willing to get therapy,” Seifert says.
Mental health benefits could mean investing in meditation apps like Calm or Headspace, holding information sessions on mental wellbeing, and subsidizing in-person or online therapy. But one key thing for business leaders and HR managers to keep in mind is that companies need to intentionally connect their mental health initiatives to a broader organizational strategy. Throwing a few apps at employees won’t address what they actually need.
Retirement plans
Retirement plans have been a mainstay in compensation packages for a long time, but experts say that the cost of living crisis is putting a renewed focus on the benefit.
“Many companies have put much more emphasis on their 401(k)s or other types of retirement programs because that’s something that the workforce really cares about,” says Seifert.
About 73% of all U.S. workers had access to retirement benefits in 2023, and 56% participated in them, according to a report from the Bureau of Labor Statistics. Young workers seem to be particularly interested in the benefit, and Gen Z is beating out their millennial counterparts when it comes to 401(k) gains, according to 2024 data from Fidelity. And around 19.3% of Gen Zers increased their 401(k) contributions in the second quarter of last year, compared to 11% of millennials, 9.7% of Gen X, and 7.8% of baby boomers, according to a 2023 Bank of America survey.
Business leaders should make sure that they’re offering competitive company matching rates to employees, Brandi Britton, an executive director at Robert Half, a management consulting company, tells Fortune. Workers care about that, she says, more than the details on particular plans.
“What we're hearing is not necessarily ‘What type?’, but ‘What kind of matching program is there? When are they eligible for it?’ Those are the two main things that we hear driving that discussion,” Britton says.
Tuition assistance
Companies looking to capture young talent need to cater to one of Gen Z’s main obsessions: tuition assistance. That wasn’t necessarily true for millennials, but the youngest adult workers are speaking up about their financial well-being.
“Those student loans are what has prevented so many millennials from starting their families at a time when they maybe otherwise would have so,” says Lupiani. “Gen Zers are going to be really insisting on benefits that give them greater stability, give them greater control over their finances so that they can live their lives the way that they want to.”
About 88% of Gen Z workers say they’re more likely to recommend their employer because of its educational benefits, according to a 2019 study from Bright Horizons, a child care provider. And companies including Chipotle, Starbucks, and Trane Technologies have all ramped up their efforts around schooling assistance to attract and retain young talent.
Educational benefits can can range from upfront subsidies for continuing education, to a tuition reimbursement offering. And student loan repayment matching is an important new perk for employers to think about.
Bonus: Flexible schedules
Flexible schedules aren’t technically part of pay packages, but they deserve a special mention because of the impact they can have on compensation planning.
About 63% of U.S. workers said having the option of being remote was the most important part of a job to them, above salary, work-life balance, and having a good boss, according to a 2023 survey from FlexJobs. Roles that are clearly labeled as hybrid or remote job positions get far more applicants than in-person roles on career sites—although only 10% of open roles this past December were fully remote, they received 46% of all applications, according to a 2024 report from LinkedIn.
Several high-profile CEOs have demanded that their workers come back to the office five days a week, but for most employees, that kind of RTO mandate is a nonstarter, experts say. In fact, the option to work remotely is often the tipping point for whether or not a staffer chooses to take on a role.
“What we are finding is if people have two jobs [options] that are basically in the same range, the vast majority of them will pick the one that's either hybrid or fully remote,” says Seifert.
Employees will even take lower base pay to secure a flexible working situation. “People are willing to take less salary if they're allowed to be remote or have a very heavy hybrid, mostly at-home type schedule,” says Britton.
