‘Pick Your Pay’: More Companies Let Workers Customize Compensation
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What is the main topic discussed in this episode?
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Here's your Money Briefing for Friday, January 6th. I'm J.R. Whalen for The Wall Street Journal. In the past few years, flexibility has moved near the top of the list of things workers negotiate with companies when discussing taking a new job.
What is ‘pick-your-pay’ and why are companies offering customizable compensation?
But flexibility doesn't necessarily just mean having a hybrid work schedule. As companies compete for workers, many are offering them flexibility when it comes to pay.
The concept is we're going to allow the employees or the prospective employees to decide what's most important to them when it comes to compensation. Do I need that money right up front or am I willing to maybe take a greater chance and have a bigger windfall a little bit down the road?
On today's show, we'll discuss the pick-your-pay approach to recruiting workers. What exactly are workers picking from, and why that flexibility might or might not be in the employee's best interest? WSJ contributor Tara Weiss joins us to discuss after the break.
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How do employees choose between cash salary and equity in these offers?
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Why are startups using pay customization to compete for tech talent?
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As the job market has gotten more competitive, we've seen many companies boost workers' salaries and push the company perks up a few notches. But some companies are taking those perks a step further, allowing new workers to pick their pay, essentially customizing their compensation package according to their needs. So what does that mean for their paycheck? And is it as good as it sounds? WSJ contributor Tara Weiss checked in with companies offering these plans, and she joins me now. Tara, thanks very much for being with us.
Of course, I'm happy to be here.
So Tara, how does this work? What is a new hire picking from to build a compensation package?
How do employers educate candidates about equity and flexible pay options?
Instead of receiving an offer of say $100,000, what happens is a new employee would be offered the opportunity to pick the amount of cash they want versus the amount of equity they want. So at one company I spoke to, it was typically 70% would be in cash as a base salary and then 30% in equity. And then it would flip for an offer of say 58% in salary and 42% in equity.
Why would it flip?
It depends on where people are in their life. If somebody is an established employee, maybe they've worked for a startup before and they had a nice infusion of cash from that startup, they really believe in this new company's mission, they might be willing to take that risk of having less base compensation and higher equity. Because in the long run, the payout could be even greater. But say, like someone I spoke to for this story who was having a wedding coming up that he needed to pay for, he wanted to get more cash than equity simply because he needed the money more immediately.
How has the recent stock-market downturn changed employees’ pay choices?
So why are more companies offering these pay customization packages to new hires?
I think it's a few things. We know what a challenging labor market this has been, and it's a great way to maybe lure people to companies that don't have that name cachet as like a Facebook or a Google, but need the same type of front back end engineers, AI machine learning people.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:48
2
What is ‘pick-your-pay’ and why are companies offering customizable compensation?
0:48–1:33
3
How do employees choose between cash salary and equity in these offers?
1:33–1:55
4
Why are startups using pay customization to compete for tech talent?
1:55–2:42
5
How do employers educate candidates about equity and flexible pay options?
2:42–3:47
6
How has the recent stock-market downturn changed employees’ pay choices?
3:47–6:06
7
Could differing pay packages among coworkers create awkwardness or fairness issues?
6:06–7:49
8
How might choosing equity over salary affect future job searches and career progression?
7:49–9:35
Speakers
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