Attract and Retain Younger Workers by Aligning Your Pay Structure with Their Needs
Millennials and Gen Z think differently about money and so should your business. We check in with companies that successfully engage Gen Y and Gen Z workers by honoring their unique features.
By: John Rossheim
To paraphrase a famous folk singer who is likely a non-entity for today’s 20 somethings, the workforce is a changin’.
Leading the charge are two generations—Gen Y and Gen Z. Each are bigger than Gen X, their generational predecessor. Collectively, they’re quickly reshaping today’s workplace.
Gen Y, known as Millennials, are now the largest generation in the labor force, with Generation Z chasing their heels.
If your company wants to attract and retain these workers, you’ll want to consider their similarities and differences when you design and communicate pay structures.
Many Millennials experienced the 2007-2009 recession mid-career. Similarly, many members of Generation Z who are just beginning to enter the workforce were coming of age when the curtain rose on the biggest economic trauma in 80 years. The great recession is just one of many factors that affect these young workers’ attitude toward money.
We checked in with three companies that offer real-life experience with aligning pay with their needs.
Granite tries to meet Millennials and Zers on their own terms
Plumbing and HVAC supplier The Granite Group fields a labor force of warehouse workers and drivers, inside and outside sales reps, and managers and management trainees.
“We have five generations of employees, from the silent generation to Gen Z,” says Tracie Sponenberg, senior vice president of human resources at the Concord, New Hampshire, firm.
Granite manages pay for its multigenerational workforce by speaking their languages. “We have to communicate with people the way they want,” says Sponenberg. Generation Z is 100 percent digital natives, but they still want face-to-face conversations about pay.
”We’re attracting younger and younger folks,” says Sponenberg. "Gen Zers are more likely to ask for what they want.”
Granite meets the expectations of Gen Z by proactively managing their pay. “We regularly review salaries and if there are pay inequities, we will correct them,” says Sponenberg.
“For Gen Z, money is much more important, and they share with each other about what they make,” Sponenberg says. "‘Joe says he makes $19 an hour and I make $18—why is that?’ they might ask.” Granite’s HR team and managers answer such questions by shifting the focus to the performance of the employee who’s inquiring, and with a more systematic approach to setting salaries and increases.
"We’re going through the process of setting up salary bands, and they will increase our transparency. Millennials tend to prefer infographics to some other methods of presentation of data on pay or anything else, and it's likely Gen Z will as well.”
MyHR connects the compensation dots for younger workers
MyHR Partners employs mainly human resources assistants, managers and directors, mostly in their 20s and 30s, says Tina Hamilton, president of the Allentown, Pennsylvania, human resources outsourcing firm.
Hamilton finds that older and younger workers come out on different sides of the time/money tradeoff. “Gen Xers and Boomers totally get the value of working 40 hours instead of 50 to 70,” says Hamilton. “But Millennials and Generation Z want the money.”
And having grown up in the long shadow of the 2007-2009 recession, “the Gen Z people get the value of the dollar in a different way than even Millennials,” says Hamilton. "They understand the value of savings.”
Gen Z workers may see that value, but they don’t always comprehend what it takes to earn it. MyHR has a solution. “Our profit sharing—which is paid out quarterly—helps them gain a solid understanding of the relationship between effort and reward,” Hamilton says.
“Our profit-sharing plan is based on tenure and performance,” she says. “We implemented quarterly profit-sharing in 2017, for the specific reason of giving young people this little push.” Profit-sharing keeps workers engaged and thinking about what’s good for the company’s bottom line.
MyHR also offers a matching 401(k) retirement contribution, which—nearly 10 years after the recession—has a palpable value felt across generations.
Power Home Remodeling demystifies commission-based pay
At Power Home Remodeling, the bulk of employees are in sales, where most or all compensation is commission and bonus, says Ilysa Raphael, vice president of marketing and senior hiring manager at the Chester, Pennsylvania, firm. More than 80 percent of Power’s employees are Millennials or Gen Z.
"Millennials want to see that hard work will pay off in dollars,” says Raphael. “They want to forge their own path to financial independence.” Millennials tend to understand how Power’s commission and bonus structure affords them the potential to follow that path to reach their destination.
Generation Z is different. “Gen Z candidates can get very distracted by earning potential,” says Raphael. Coming straight from college, they don’t necessarily understand what it will take to pay rent while also making car and student loan payments, she adds.
In addition, younger candidates tend to overemphasize higher base salary and don’t understand how large commissions can be, and what bonuses can add. Power’s sales reps and executives can earn weekly, monthly, quarterly and annual bonuses for hitting certain marks.
To ensure that young workers understand that value proposition, Raphael and her colleagues spend a lot of time educating job candidates and new hires on how the pay structure works, and how it can work for them.
“We talk to them about how commissions work. We want to give them realistic goals they can and will hit,” says Raphael.