After years of pressure on compensation programs due to a highly competitive labor market, changing employee priorities, and rising inflation and cost of living, most employers are experiencing relief. Employers are now shifting the focus to build strong and actionable foundational compensation programs as we navigate new economic uncertainty.  

When discussing the 2025 SHRM State of the Workplace report, President and CEO of SHRM Johnny C. Taylor, Jr. shares that HR leaders are shifting their focus to long-term workforce development and engagement strategies. We are seeing the same theme emerge with our clients and in the communities we serve. There are several ways you can ensure the investment you make in your employees has a lasting return. 

There are several factors to consider when building a compensation structure. Perhaps one of the most important steps in doing so is to revisit your grades and ranges as your organization stabilizes after consecutive years of an employee-driven talent market. Taking time to ensure the right number of grades are available to support career progression, the appropriate minimums and maximums leverage the full range of pay for various levels within the organization, and intentional grade progression is incorporated to support growth within a role as well as through promotions will set your organization up for success. 

If you provide annual or periodic salary increases, consider how to determine the budget and how leaders distribute it among employees. Inflation and salary increase budget amounts are separate and distinct numbers that reflect buying power and the cost of labor, respectively. In some years, salary increase budgets outpace inflation and in other years they lag inflation. As you prepare your budgets for next year, take time to understand the dynamics that most affect your workforce and be thoughtful about what outside factors should be considered when setting the budget for compensation and other rewards programs. 

Employees are often concerned about their ability to afford benefits and ensure retirement readiness as they fulfill their contributions at work. It can also lead them to wonder if the grass is greener somewhere else. As competitors for talent get creative in how they showcase their organization, take time to understand where your rewards programs shine. It might be time to launch an internal campaign to effectively communicate the value of your current programs and highlight the most compelling benefits you offer as an employer.   

Leveraging compensation and rewards best practices, data, and communication strategies highlight the investments you already make in your employees. It also contributes to sustainable compensation and rewards strategies that positively impact the attraction, retention and engagement of talent. Finally, it bolsters the long-term financial landscape of the organization. Conflict between new hires and tenured employees, individuals and supervisors, and other equity and outlier situations that are embedded into your pay program today will not self-correct. They compound overtime and can distract from effective decision-making in the future. Taking time to ensure your organization has a strong foundation to build on  will serve you  well today and in the uncertain future.