4 Compensation Management Trends for 2023

Compensation Management Trends 2023

The pandemic. The Great Resignation. A looming recession. Enterprise organizations have had to navigate all these challenges in recent years – is compensation management adding to your headaches? Here are 4 trends to track for 2023.

Compensation management is the process of how an organization pays its employees. This can include both direct and indirect compensation, such as salary, bonuses and benefits.

How your organization manages its compensation is important because if your employees don’t feel they are compensated properly, they will look for work elsewhere. When compensation management is broken, other business challenges are even more difficult. How do you know where to start?

You can begin by understanding four trends that will make a prominent impact in 2023. 

1. Turnover Remains High Across All Industries

Employee turnover is the rate of losing and replacing talent. It’s been a huge deal over the past year, as an average of 4 million Americans quit their jobs every month in 2022. And that trend is likely to continue in 2023, as more workers are looking for better pay and benefits.

There is high turnover across all industries, especially in unskilled labor markets and industries where workers are overutilized. This is happening because employees are burned out and still recovering from the pandemic.

So, what can organizations do to keep talent? One way is through fair compensation, which ensures workers are paid fairly based on their experience, performance and job responsibilities. 

By following these steps to make fair compensation happen, you can help to improve retention in your organization and make employees feel valued for their contributions:

  • Create an outline
  • Manage compensation effectively
  • Develop a market-based approach
  • Establish pay ranges
  • Implement your plan and communicate it with your employees

2. Pay for Performance Matters

Pay for performance is a fair and transparent compensation structure that benefits employees and organizations. For example, the organization can set a goal and reward employees who meet that goal. This is often seen in sales, where salespeople can receive variable pay or merit pay increases based on their performance.

Therefore, pay for performance is beneficial to organizations because they help inspire employees to perform better and keeps them engaged and motivated.

Since pay for performance matters, more and more organizations are looking to establish a standard performance review process. That allows organizations to:

  • Tie bonuses to individual and company performance.
  • Calibrate performance before compensation planning, which allows for budgeting and granting increases based on an employee’s performance merit matrix.
  • Incorporate more frequent reviews to better sync up on development goals, which can result in consistent pay adjustments.

3. Pay Transparency Remains a Challenge

Pay transparency is “the practice of employers revealing salary data during the hiring process or within the organization.” And it’s going to be a major factor for organizations in 2023.

The Harvard Business Review says that by the start of 2023, “a fifth of all U.S. workers will be covered under pay transparency laws, a trend that experts predict will continue to grow.” Therefore, it’s important for companies to start implementing transparency measures in their organizations or make adjustments to their current practices.

Unfortunately, the actual implementation of pay transparency can be complex. For example, it can be challenging to be truly transparent and competitive in the tech industry, where smaller organizations compete with companies that have higher budgets. Therefore, organizations can be hesitant about pay transparency, and be more reactive than proactive.

4. Compensation Training & Communication Are Key

Compensation training is the process of educating your employees on how their compensation is determined. Is their salary based on experience? Are their bonuses determined by meeting specific goals? When employees understand why and how they are compensated, they are more likely to feel valued and want to stay with the organization.

One of the most effective ways to communicate employee compensation is through rewards statements, which give employees an inside look into how they are compensated. They can contain:

  • Base pay
  • Bonuses
  • Paid leave
  • The value of employer-paid insurance plans
  • Stock options
  • Company contributions to a 401(k), pension, or other retirement plan

When employees are able to visualize the true value of their employment (and understand it thanks to their compensation training), they become more engaged and motivated.


Understanding the compensation management trends for 2023 is the first step in setting your organization up for a successful year.

By acknowledging these trends – turnover will continue to be high, pay for performance is important, pay transparency can be tough, and compensation training is essential –organizations will be better equipped to rise to the occasion, even in times of volatility. And your employees will be better for it.

Ready to take your organization to new heights in 2023? HRSoft offers the award-winning compensation management software, COMPview Software, to help boost employee engagement, performance and retention. Contact us today to learn more.