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“Human Capital”

Salary Packages: The Era of Benefits

 

The salary package is just one of many factors that constitute the commitment between an employee and their organization. Nevertheless, it is one of the essential elements in the employer-employee relationship. Let’s analyze some trends in this field, given the importance of the topic for the competitiveness of any company in the current hospitality landscape.

The evolution of the remuneration package is closely linked to that of the economy or the history of companies and has been influenced by various factors. Among the main ones are the contingencies of each industry, demographic characteristics, and the generational specificities of the active workforce.

Regarding the hospitality sector in Portugal, and compared to other areas of the business fabric, the concept of the remuneration package has represented, with some exceptions, little more than receiving the salary itself. This fact constitutes a significant competitive disadvantage in attracting new generations of professionals, especially those born in the 21st century – known as Generation Z or Zoomers.

This generation, which already represents the largest active demographic group in the job market, replaces the “what” with the “why.” More than projects, zoomers look for causes and identify with differentiated employer experiences. Thus, no other generation has emphasized so much non-monetary benefits – those that go beyond the financial compensation – for their work.

In summary, we can say that this generation values three factors: diversification, personalization, and autonomy.

Let’s start with diversification. According to a study by consulting firm Lincoln Financial Group, 60% of Generation Z professionals would accept, on average, a 10% lower salary in exchange for other relevant benefits. The same study also concludes that 71% of these professionals assume that, after salary, the benefits package is the main reason for their continuity in the company. Adding to these data, a survey by Glassdoor found that 80% of Millennial and Gen Z professionals openly prefer to achieve more benefits in their compensation package than to have an improvement in their salary. More than a salary increase, which is practically absorbed by the high tax burden in our country, an additional benefit has a perceived value far beyond its effective cost and can have a significant impact on the professional’s quality of life. In this context, leading analysts point to health and well-being, mobility, education, and entertainment as the most relevant areas for the benefits desired by Generation Z professionals. From the monthly subscription of rideshare services, online training, to entertainment streaming platforms, there are numerous examples of potential benefits that should become part of the organizational compensation ecosystem, as they are already part of the lifestyle of zoomer professionals.

Secondly, we have personalization. This is the generation of options, “information first,” intuitive processes, and “tailor-made” experiences. This is the generation that is used to canceling their music streaming subscription overnight, without bureaucracy, and reactivating it when they feel like it; having vast amounts of entertainment content available to choose from, or being able to order from the menus of numerous restaurants with three or four taps on an app.

And finally, we have autonomy. It is also important that remuneration packages follow the trend of allowing unprecedented control by the professional in the continuous configuration of their benefits. Several companies, such as Spotify, N6A, or Evotext, have already invested in developing systems where professionals have the autonomy to activate or deactivate the benefits they consider relevant over time, based on the credits they have in their compensation package.

In summary, diversification, personalization, flexibility, and autonomy are unavoidable trends in the current landscape of salary packages. Far from this reality, it is essential for the national Hospitality sector to note that winning the historical battle of low wages is not enough to retain qualified Human Capital, who consistently escapes to other professional areas. As we have seen, it is also necessary to calibrate the relevance of the remuneration configuration to make it competitive and thus attractive to the new generations in the job market.

Written by João Silva Santos

January, 2021

This article was published in Ambitur as part of the “Human Capital” series. You can access the online version here.

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