3 Ways To Pay Smarter in 2025

As McKinsey & Co. has found, the top driver of employee disengagement is inadequate total compensation. Whether employers like it or not, nearly half of American workers are planning to look for a job in the next 12 months, with many seeking higher pay amid record-high housing costs and inflation, according to other research by Bankrate.

The good news is there are strategies for restructuring pay so it drives increasing top and bottom lines.

Strategy #1: Anchor your compensation system to your brand promise. You’ll only be able to generate the revenue and profits to pay your team competitively if your compensation plan reinforces what matters most to the customer. MiniMovers, a 39-year-old, 500-person company in Brisbane, Australia, understands this. Specializing in door-to-door local moving, the company is known for its “Workmanship Guarantee.” If its team damages something it is moving, it will fix it.

While most moving companies use insurance policies to cover breakage, MiniMovers self-insures. It sets aside 3 percent of revenue for a team bonus that gets divided among the movers and distributed every three months— if nothing is broken. If there is breakage, the company subtracts the cost of the damage and uses the cash to reimburse its customers.

Its bonus-motivated movers police themselves to make sure nothing gets broken. “If someone is not doing the right thing, the coworkers will quickly step in,” says founder Mike O’Hagan. “They will train new colleagues on the spot to make sure they handle customers’ property the right way.”

MiniMovers‘ pay program also helps it attract and retain a great workforce. “We pay well above the minimum wage,” says O’Hagan, and the breakage bonus makes the overall package quite attractive. In turn, their stellar reputation reduces marketing costs and allows it to premium price, improving margins in a competitive business.

Strategy #2: Think fair, not same. As the best sports teams know, the most unequal thing you can do is treat unequal team members equally. Do all quarterbacks earn the same amount? No. If you’ve got a better quarterback-efficiency ratio and a better history of winning, you’ll generally get a better contract. It’s the same with every other position on the team.

Establishing wide pay bands for each position allows you to peg what you pay each team member to performance. At Allied Printing in Manchester, Connecticut, customer service representatives, production planners and others can make twice or more their starting pay, sometimes into the six figures. The key is having metrics that delineate star performers and reward them for their performance. “Moving up” means handling more complex jobs and larger accounts, where the greater gross margin dollars afford higher wages. This allows employees to continue in their current jobs while progressing up the pay scale.

Strategy #3: Structure a company-wide bonus plan that vests. Allied Printing also provides a bonus plan in which half of the annual bonus is paid after the end of the year, so the money doesn’t get lumped in with base pay in employees’ minds. The other 50 percent vests over the next six years, divided equally into six chunks. These future buckets of money increase each year, and employees only receive them if they are still with the firm.

Like a stock, a vested bonus creates a psychological situation where people will do more to avoid a loss than get a gain. Employees weigh the decision to leave more thoroughly, given the sizable pots of money sacrificed. Would-be talent poachers will need to offer sizable signing bonuses.

There’s a payoff to giving compensation this much thought: By getting this right, you won’t have to worry as much about achieving your biggest goals for the company. Your team will have a strong incentive to do that for you.