Offer Indirect Compensation Methods That Employees Crave
Workspan Daily
March 09, 2022
Key Takeaways

  • Employees want total rewards. A Staples survey found that 62.3% of employees would give up a larger salary to get better workplace perks, meaning a total rewards approach to compensation that includes forms of indirect compensation is critical to recruiting and retaining employees. 
  • There are various indirect compensation methods you can employ. These include offering schedule flexibility and career development opportunities, cultivating an engaging workplace culture and providing thoughtful employee recognition. Additional perks that are specific to your organization, geographic area, or industry also are recommended. 
  • Work with a compensation consultant. A compensation consultant can take an objective, critical look at your current compensation approach and give you suggestions for making it more effective and sustainable. 


Say you have a friend who is deciding between two different job offers. The first organization is offering your friend a high salary and a standard benefits package that includes health insurance and employer contributions to a retirement account. The second organization is offering a lower salary, but in addition to standard insurance and retirement benefits, your friend would have the flexibility to work from home, gain access to an on-site fitness center, get free lunches every day, and receive a company laptop and cell phone.

In the end, your friend takes the job with the second organization. But research shows this isn’t really surprising. According to a 2020 Staples survey, 62.3% of employees would accept a lower salary in exchange for better workplace perks.

But what does this mean for your organization? It means that whether you’re deciding on an executive compensation package or adjusting salaries for current entry-level employees, your approach to compensation is something job candidates and employees will be keeping an eye on.

And the best approach to compensation, one that will empower you to recruit and retain top employees, is total rewards compensation. This approach will allow you to compensate employees in both financial and non-financial ways, much like the second organization in the scenario above. 

Power of Rewards

Astron Solutions’ guide to total rewards compensation states that total rewards compensation “involves taking a fully comprehensive and holistic approach to how your organization compensates employees for their work.”

The two main parts of a total rewards system are direct compensation and indirect compensation. Direct compensation is all of the financial ways your employees are compensated, including salaries, bonuses, commissions and equity benefits. Indirect compensation, on the other hand, encompasses all of the other ways — both tangible and intangible — that your employees are compensated. You might, for example, offer subscriptions to a streaming service or the flexibility to work remotely.

It’s logical that employees want to be compensated in this more holistic way — after all, who wouldn’t want to receive additional compensation on top of their salary? However, organizations run into some roadblocks when working out the particulars, especially when it comes to indirect compensation. Let’s explore five popular methods of indirect compensation that your organization can consider.

Flexibility

How strict is your organization’s policy on workday hours? The flexibility for employees to begin and end their day between certain windows of time (for example, beginning the day between 7:30 and 9:30 instead of being required to arrive at 8:00 sharp) can make a big difference to employees’ well-being and work/life balance, as employees can work when they can be most productive and engaged and can accommodate other commitments outside of work.

Additionally, schedule flexibility can include the reallocation of work hours for a number of reasons, including:

  • Attending medical appointments
  • Taking pets to the vet
  • Attending to personal business (e.g. renewing a driver’s license or going to the bank
  • Caring for sick children/going home when childcare falls through
  • Taking a short Friday to accommodate a weekend trip

Schedule flexibility is especially important during the COVID-19 pandemicWhen an employee works, as well as the format of an employee’s job (in-person, hybrid, virtual) may affect their well-being, especially if they (or a spouse, child, or other loved one) contract the virus.

Career Development 

Personal fulfillment at work is key to retaining the best employees. When an employee has the opportunity to engage in additional training or continuing education, they’ll be able to find that fulfillment as they hone their skills, build connections with other professionals in their field, and gain the knowledge and experience they need to move up in your organization.

Here are some of the career development opportunities you might offer as part of your total rewards compensation plan:

  • Continuing EducationMany employees enjoy the opportunity to earn continuing education credits or hours. When you host or pay for these opportunities, you’re giving employees the chance to learn from experts in their field, which can make them better at their jobs and more excited about their career paths.
  • Association Memberships. Associations are designed to connect professionals within a specific field or sector. Associations also offer a number of career development opportunities themselves. One great option for offering career development as indirect compensation is to pay the membership dues for your employee to be part of an association so they can take advantage of these benefits.
  • Paid Recertification/RelicensingIn some fields, employees are required to periodically relicense or recertify to keep their credentials up to date. Offer to pay for recertification/relicensing exams or courses. You could even offer to pay for employees’ study materials and access to a tutor or study group.

Career development opportunities are a type of indirect compensation that clearly benefits both your employees and your organization. When you provide these opportunities, your employees will not only be more engaged and excited about their roles and career paths — they will also be more skilled and efficient workers.

Engaging Workplace Culture

Workplace culture is considered a type of intangible indirect compensation. The culture in which your employees work every day is powerful — and whether that environment is engaging and positive or not is largely determined by how you run your organization.

Here are three questions to consider when targeting workplace culture as an indirect compensation offering:

  • What are your organization’s values? If your organization claims to value integrity, respect, and community service, your leaders and managers should cultivate a work environment that reflects those values. For example, if your company values community service, you might demonstrate that value by arranging corporate volunteer days or offering volunteer grants.
  • Do employees have the chance to get to know each other? Employees find work more enjoyable when they have friends at work. But without opportunities to get to know their coworkers, it’s difficult for employees to build those friendships. Provide opportunities, such as special catered lunches, virtual coffee breaks, or Friday service projects where employees can talk to each other about more than the project their team is working on.
  • Is your workplace an uplifting and positive place to be? A large part of an engaging workplace culture is how positive and uplifting your organization is. Cultivate an environment based on respect, kindness, and encouragement. This will not only keep your current employees happy and looking forward to work each day but will be an attractive selling point when you’re hiring.

The typical full-time employee works with the same people and in the same place for 40 hours every week, which is a lot of time to spend in one environment. This is why creating an engaging workplace culture is a critical aspect of indirect compensation — employees want to be happy where they work and while they work.

Employee Recognition

Employee recognition is the practice of celebrating your employees and their accomplishments. You might do so by offering an Employee of the Month reward complete with a spot bonus and a VIP parking spot, or by encouraging your employees to write a thank-you note once a quarter to a co-worker who was particularly helpful to them. Some other ways you can recognize your employees include:

  • Awarding plaques or trophies to top performers
  • Offering prizes to teams who accomplish quarterly goals
  • Celebrating birthdays and work anniversaries
  • Writing LinkedIn recommendations
  • Surprising employees with retreats or free meals to change up the daily routine

Employee recognition makes employees feel appreciated for all the hard work they’re doing to move your organization forward. Folding your employee recognition efforts into your total rewards compensation approach can show your employees and potential employees that you’re trying to actively communicate that they’re valued and needed.

Additional Perks

In addition to schedule flexibility, career development opportunities, workplace culture, and employee recognition, you can offer additional perks to your employees. These might be specific to your industry, organization, or geographic area. Or they might be perks you’ve learned your employees want through feedback or surveys. Here are some to consider:

  • Donation Matching: Several organizations offer donation matching to their employees. Employers financially match a donation an employee makes to a charitable organization at a 1:1 (or higher) ratio. Check out Double the Donation’s guide to workplace giving to learn more.
  • Breakroom Snacks: Encourage employees to take breaks and to eat healthier by providing free breakroom snacks. Provide healthy options like trail mix, fruits and vegetables, and yogurt.
  • New Technology or Equipment: New technology or office equipment can go a long way in boosting employee morale and productivity. Provide your employees with a new laptop, phone, or standing desk. You could also provide high-quality desk chairs, computer monitors, or blue light-filtering glasses.
  • Employee Outings or Retreats: Many employees enjoy doing things out of the ordinary. Coordinating outings to a local museum or park or arranging retreats to a campsite or beach resort can get employees excited about getting to know their coworkers and developing team-building skills outside of the office. Just remember to be cognizant of the current COVID-19 situation in your local area and to plan accordingly.

Every organization can offer perks beyond the more traditional forms of indirect compensation. All it takes is a little creativity and effort to get to know what your employees want from your organization and how you can help enrich their lives both in and out of the workplace.

When you take a total rewards approach to compensation and consider how you can incorporate indirect compensation into your offerings, you can provide your employees with new opportunities and resources to make their experience at your organization more positive. It’s a logical business move to offer this type of compensation, as understanding indirect compensation gives you more options to compete for talent.

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