(Less) compensation (all) benefits


(Disclaimer: I am not from human resources so a lot of this is my observation and idea as an outsider)

Had an insane thought a few days ago. Companies that reach a certain size tend to have a team of Human Resource folks diving into benchmarking compensation against competitors. Better companies have hr that will ask how much do you need/ expect. Benefits on the other hand tend to be an afterthought. Personally I think benefits are a powerful tool towards retention and act as a barrier of exit if designed right.

HR will take directions from finance as to headcounts allowed for hiring and within the headcounts a budget is set for them to negotiate and navigate a salary bracket with talented individuals. This is tedious and ineffective. Essentially it is the procurement unit signing up multiple contracts without a master contract agreement with key vendors (ok there are occasions HR will outsource to agencies like Adecco but in general individuals are all unique and want their own contract)

What if we flipped the model on it’s head and focused solely on benefits? The logic is that we need compensation to pay bills, mortgage and food in general. For these common items would it make sense to be able to Have them be benefits for the employees? Bills will be paid, mortgages will be paid, food will be paid. (Additional items such as child care, old folk’s homes, transport could be looked into but this would serve as a general idea)

The next question the how. Procurement or a separate procurement team could help to source for the best deals and negotiate on behalf of all employees. For MNCs with a sizeable employee strength in the local office (anything beyond 50)I think there would be economic scale to negotiate deals with telcos, banks for mortgages and perhaps even restaurants. The company would help to pay on behalf of the staff. The collective bargaining would help to drive down costs (always keep finance happy) and keep the same degree of utility for the staff. The added costs would be from hiring a procurement team to handle the new negotiations, but this is a one time investment that will pay off as more services are offered as benefits to staff.

Returning to compensation. There will still be a need for compensation to be offered for employees. People still prefer having freedom of choice (ie I highly doubt people want to be told where to eat). But in general, if the catalogue of benefits offered is big enough, the compensation could shrink over time and reduce the need for monetary transactions. The issue to discuss then would no longer be about retention, but growing employees so they get better at the job and deliver more value. This might actually drive better conversations with senior leadership and stop focusing on pure bean counting but people development.

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