The parallel worlds of rewards for new hires and veteran team members

In the dynamic corporate world, rewards for new hires and long-serving team members create an unusual paradox. On the one hand, new additions to the team attract attention with their fresh and relevant skills and need to be won over with a competitive offer. On the other hand, long-serving employees should be valued for their extensive experience, commitment, and stability in the job with the appropriate benefits package. This complex situation underscores the complexity of managing compensation and benefits packages in today's business so as to strike a balance between attracting new talent and meeting the needs of experienced team members. To bring further clarity to the situation and outline possible strategies for action, we invited Veronika Simova, Sales and Business Development Manager from our team to comment.

Why is this a problem and for whom? 

It is mainly a problem for the employer, but it often becomes a problem for the employees themselves. If there is indeed a discrepancy between the salaries of new hires and existing team members with the same responsibilities, then such information about differences, even if not significantly high, can lead to serious demotivation, even personal resentment, and reduced commitment within teams. 

For people with significant contributions to the organization and a number of years in the organization, such "inequality" could carry a sense that their loyalty and expertise are not adequately valued and recognized. According to a number of studies in recent years, while salary may not be a major motivator for people who are already part of a company, it can become the number one demotivator in such situations. 

Apart from the risk of directly losing experienced and valuable colleagues to the company, such a situation creates internal tension and a negative team atmosphere that can worsen work atmosphere and performance.

All these factors highlight the importance of fair and transparent compensation management in the organization to maintain balance and ensure satisfaction among all team members.

In which sectors is it most common?

The pandemic has accelerated the shift to digital technologies and the reorganization of the working environment, which is driving increased demand for certain professionals and a correspondingly higher rate of increase in their salaries. 

For example, in sectors such as information technology, engineering or digital marketing, rapid technological change can create a constant need for up-to-date skills. This in turn affects the competitiveness of new hires and can tempt employers to have higher offers to new team members. 

Industries that require specific scientific or medical skills, for example, often face the challenge of attracting and retaining highly skilled professionals. It is therefore particularly important here to have a clear and transparent policy that balances both sides of the coin with good starter packages, but before that, with specific individual packages for long-serving members of organisations.

What are successful strategies to balance the situation, allowing companies to be competitive in the market and effective in building their compensation policies?

Solving such a case requires careful management of compensation systems to adequately reflect the contributions of long-serving team members and maintain a balance between attracting new talent and retaining experienced professionals. 

In any successful organization, it is essential that management conduct an up-to-date analysis of labor market trends. Lack of clarity on the overall market situation and the value of resources in a particular business results in a lack of ability to plan strategically and financially effectively. 

It is important to emphasize that salary reviews and permanent increases for new and existing employees are not the only tools in the hands of employers. Our advice to our partners is to take a holistic approach analyse the needs and preferences of their people and form innovative strategies based on these: 

• For example, companies can hire new staff with outsourced administration. In accordance with the law, they "must not be placed in worse conditions than full-time employees", but at the same time, there is no limited difference in a positive direction. This could be a workable temporary solution in a situation of short-term projects or campaign employment. 
• An outsourcing service could be used, applying a pay-for-hours model. This approach provides flexibility and the opportunity for higher rates, which can be advantageous to all parties.
• To stimulate long-term commitment in teams on the other hand, "Loyalty bonus" systems can be defined as a type of incentive. This bonus is usually given to people who have been with a given company for an extended period of time and can be provided in various forms - additional monetary rewards, shares, days off, or other benefits. The purpose of a loyalty bonus is to support the engagement of experienced and loyal people and to encourage them to continue to contribute to the success of the company.

Company leaders are realizing that the idea of new people receiving higher levels of compensation relative to veteran employees is a poor decision that could be detrimental to the company's culture and teamwork. Yet, there are situations where the decision is resorted to due to the impossibility of another one for a certain period of time. At such times, transparent communication based on trust and mutual respect is the only path to success.