In a survey run by GetApp last year, we found that 76% of companies had changed their compensation strategy due to the COVID-19 pandemic.[*] These weren’t just dollars and cents changes, either, but major overhauls to the systems used to deliver and manage employee pay.
Adoption of on-demand payroll software, financial wellness apps, and even tools to pay employees in cryptocurrency had all increased.
To find out if these trends are continuing in 2022, we recently ran the same survey—with a few added questions about the impact of recent high inflation—and collected responses from 279 compensation leaders at U.S. companies.[**] Below, we’ll reveal our results, and explain everything HR leaders need to know to nab these compensation upgrades for their own organization.
COVID-19 continues to have a major impact on how employees are compensated. Not only do 86% of compensation leaders now say COVID-19 has affected their organization’s compensation strategy, but 51% say it’s affected their strategy significantly. That’s 19 percentage points higher than our results from last year (32%).
In order to provide financial relief and retain talent during the crisis, companies have increased salary/wages and bonuses above expectations (cited by 68% and 51%, respectively), offered new benefits (48%), deployed new channels for employees to receive compensation (26%), and more.
And compared to a majority of compensation leaders last year who said all strategy changes due to COVID-19 were only temporary as long as the pandemic lasted, this year close to half of respondents say all compensation changes are permanent.
On top of COVID-19, companies are also dealing with another obstacle in 2022: inflation. The highest inflation in 40 years has not only raised prices on consumer goods and services, but on labor as well. As a result, organizations have had to update compensation strategies even further to attract talent and reduce paycheck pain points among current staff.
A majority of compensation leaders this year say inflation has caused their organization to significantly alter its compensation strategy—re-upping many of the changes, such as raising wages and bonuses, that were already implemented due to COVID-19.
Here, again, close to half of compensation leaders (49%) say all strategy changes due to inflation are permanent, while 34% say they’re only temporary as long as high inflation lasts.
In the next sections, we’ll look at specific compensation trends that are being accelerated in 2022 by these disruptors.
As expenses continue to creep up due to high inflation, employees are growing impatient waiting for a predefined “pay day” to receive their wages.
They’re letting employers know it, too: The number of compensation leaders saying their workforce has expressed a significant interest in receiving their pay more frequently than the organization’s current pay period allows jumped from 24% in 2021 to 47% in 2022.
To provide relief, more and more companies are implementing a new payroll feature called on-demand pay. Found in stand-alone apps or payroll software suites, on-demand pay allows workers to access their wages as they earn them, instead of having to wait for a predefined payday.
If a bartender picks up a shift and nets $200, for example, they can simply request that $200—through a web browser or mobile app—which is then dispersed to the bartender’s bank account that same day. It’s a quick way for workers to get emergency funds without taking out a loan.
According to our survey, the number of businesses that have implemented on-demand pay increased from 51% in 2021 to 71% in 2022.
It should be noted that our 2022 survey data contains more than double the amount of responses from compensation leaders at banks and other financial institutions than our 2021 survey data (38% vs. 18%)—making it the most represented industry by far.
Given that financial institutions are often at the forefront of implementing new financial tools internally, it’s likely that this overrepresentation skewed the data in on-demand pay’s favor. So, is it realistic that close to three out of every four businesses has this relatively new payroll feature? Not really.
That being said, there’s no denying that interest in on-demand pay is increasing, and that it has distinct advantages over traditional payroll transactions. Companies should give this trend serious consideration if they want to find a way to provide financial relief to employees without raising pay.
Last year, we warned that there are a few caveats to be aware of when considering on-demand pay systems. Those caveats still hold true.
First, employees can typically only access a maximum percentage or dollar amount on-demand every pay period. It’s unlikely they’ll be able to get their whole paycheck as they earn it in real-time. Vendors also typically charge a fee—usually a few dollars—for every transaction. Companies can pass those fees off to workers or pay them themselves.
If your current payroll provider doesn’t have on-demand pay, look for a stand-alone on-demand pay vendor that can integrate with your payroll system, or consider switching payroll systems altogether.
Check out GetApp’s Category Leaders in payroll software here.
With emergency expenses and high prices taking bigger bites out of paychecks, more workers are asking their employer for help with budgeting in 2022. Compared to only 24% of compensation leaders in 2021, this year 41% say their workforce has expressed significant interest in getting help managing their finances.
Normally content with letting banks and financial advisors do the bulk of the work in assisting employees with managing their money, employers are increasingly caving to this worker pressure and offering help themselves through the implementation of financial wellness apps.
Financial wellness apps allow employees to create personal budgets, track spending habits, manage debt, analyze their credit score, and get advice from on-demand financial coaches. Some even offer access to loans and on-demand pay. The goal is always the same: To reduce stress, and increase productivity and engagement.
The popularity of these apps is growing. In 2022, 72% of organizations offer a financial wellness app, compared to 59% of organizations last year.
A pulse survey is a great way to get employee feedback on different stressors in their lives. If financial stress is rampant, that could indicate that a financial wellness app would be welcome.
Don’t be surprised, however, if some employees aren't comfortable managing their personal finances through a company-sponsored app. This should be a purely optional perk.
Check out top-rated employee wellness software options here.
Last year, as cryptocurrencies went from a niche interest to a mainstream commodity, 61% of compensation leaders we surveyed said their workforce had expressed at least some interest in receiving their pay in the form of cryptocurrencies such as Bitcoin, Ethereum, or Dogecoin.
In 2022, we expected interest in cryptocurrency payroll to cool down thanks to a recent spate of crypto wallet hacks and a valuation crash of many notable cryptocurrencies (Bitcoin’s price, for example, plummeted to an 18-month low in June). But that’s not what happened.
Seventy-six percent (76%) of compensation leaders now say their workforce has expressed at least some interest in being paid in crypto. Furthermore, the number of leaders saying their workforce has shown significant interest in being paid in crypto more than doubled last year’s figure (37% vs. 18%).
Employees who wish to be paid in cryptocurrency are taking a big gamble. The likelihood of their pay decreasing in value thanks to crypto’s volatility is high. On the other hand, if employees sit on their crypto stockpile and manage to sell high at the right time, the chance to make a profit on their paycheck is there. Employees living in areas with volatile currencies, like Latin America, have an extra incentive to get paid in crypto.
The benefits for employers aren’t as clear cut, and questions remain on how crypto payroll will be regulated and taxed in the future. This hasn’t stopped companies from investing in crypto payroll systems, however: The number of companies that are giving employees the option to be paid in cryptocurrency jumped from 14% in 2021 to 29% this year.
Keeping the skew of our data from banking and financial institutions in mind, these findings still suggest that although crypto has lost some of its luster as of late, there is still significant interest in using crypto to compensate employees.
Crypto payroll systems make the transition to paying employees in crypto easier in a few ways. For one thing, these products can automate the process for turning company cash into crypto wage payments. Many platforms also use “stablecoins”—a type of cryptocurrency whose value is pegged to a more stable asset, such as the U.S. dollar or gold—to sidestep some of crypto’s volatility.
That being said, there are still serious risks to paying employees using cryptocurrency. Crypto security isn’t as ironclad as once believed, pending legislation could eliminate the benefits of crypto payroll, and there’s no guarantee your provider of choice will offer the same cryptocurrencies that your employees actually want.
Consider rolling out crypto payments to contractors (spot payments have more legal wiggle room than ongoing wage payments) or international workers (crypto payments tend to be faster than international payments or wire transfers) first. You can trial different platforms to see which one works best for your needs. Lastly, remind employees that this is optional, and that you are not responsible for crypto valuations.
None of this interest in leading edge compensation systems would mean much if it didn’t result in better talent outcomes. Luckily, our data indicates that these changes to the way businesses handle employee compensation are paying off.
This year, more compensation leaders agree that their current compensation strategy is successful in attracting and retaining top talent today. On top of that, more leaders in 2022 say their strategy will be successful in attracting and retaining top talent five years from now.
Outside of the invention of direct deposit, payroll and compensation have had little reason to reinvent themselves. But the onset of back-to-back hurdles in the forms of COVID-19 and inflation have pushed the industry to evolve more than it ever has before.
Companies can’t always turn to pay increases when times are hard. So if your organization is struggling to attract and retain talent, consider implementing these compensation gamechangers to at least give workers more flexibility and financial freedom.
If you’re looking for new compensation management software, check out GetApp’s Category Leaders here.
*GetApp’s 2021 Compensation & Payroll Survey was conducted in July 2021. We collected 300 responses from U.S. workers in HR, accounting, or executive leadership who have thorough knowledge about their employer’s compensation strategy and payroll systems. The goal of this survey was to learn what changes that companies have made to employee compensation in response to the COVID-19 pandemic.
**GetApp’s 2022 Compensation & Payroll Survey was conducted in July 2022. We collected 279 responses from U.S. workers in HR, accounting, or executive leadership who have thorough knowledge about their employer’s compensation strategy and payroll systems. The goal of this survey was to learn what changes that companies have made to employee compensation in response to the COVID-19 pandemic and inflation.
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