In today's rapidly evolving maritime sector, understanding the intricacies of compensation and benefits has become paramount. The dynamics between individuals and their compensation packages in the maritime sector are shifting dramatically, demanding an agile response from employers.
I aim to share key findings and insights into the current landscape of compensation and benefits in the maritime sector, along with predictions for the future.
You can skip forward to your most pressing interests or concerns by clicking below:
The current landscape of compensation and benefits
Compensation and benefits have emerged as a hot topic, no longer confined to human resources discussions but extending into broader boardroom deliberations. The reason for this strategic shift is the formidable challenge that compensation presents.
Rock and a hard place
It's akin to navigating between a rock and a hard place, and for maritime businesses, it's become an ever-increasing complex subject. Businesses are striving to keep pace with the evolving demands of employees, and data has emerged as a critical need.
More, more, more
You tell us that your businesses require more data, and it must be more specific, more accurate, and more up-to-date. We have never been in a period where we have been asked for bespoke compensation intelligence reports more.
But the challenge in compensation doesn't stop at attracting new talent; it extends to retaining existing talent too.
In a recent ship management survey, a staggering 87% of superintendents in the Asia-Pacific region expressed their intention to change jobs within the next 12 months. This highlights the volatility of the maritime job market and underscores that compensation and benefits are integral to not only attracting but retaining talent.
What goes up, does not come down
I could give you some complicated commentary here from economists about wage rigidity and stickiness but I’m going to keep it simple and cover a few points that we see making their mark; the cost of living, growing inflation rates, talent shortages, and generation diversity.
Cost of living and inflation
You’ve read in the news about the increased cost of living globally. It is putting pressure on compensation and benefits because it affects the financial well-being of employees. When compensation stays the same and does not rise with the cost of living or inflation, it can have a detrimental impact on people. It impacts their quality of life and creates feelings of being unvalued
People want to see compensation and benefits grow to ultimately improve their lives and advance their opportunities to better things.
Talent shortage and generational diversity
The maritime workforce is witnessing a significant portion approaching retirement age, leading to an increasing demand for new talent. At the same time, the industry is encountering multiple generations in the workforce, ranging from baby boomers and Generation X to millennials and Generation Z. These generational shifts bring distinct preferences and perceptions of compensation and benefits, necessitating a more flexible and diversified approach. We now have to think about ‘Generation Choice’ and what it is we can do to attract and retain them from a compensation point of view.
Emotions run high when it comes to compensation
Compensation and benefits are deeply intertwined with an individual's financial security, self-worth, perceived effort-reward balance, quality of life, validation, and job satisfaction. As such, it's an emotionally charged topic for employees. Employers must navigate these emotions carefully to minimise negative sentiments, as often, these emotions are in our hands…
Current trends in compensation and benefits
I’ve talked quite a bit about the current landscape but I now want to share some trends we are seeing right now. Accumulated from our employment surveys in 2023, the answers come straight from you or your employees.
A notable trend is that compensation is not just about attracting new talent but also about retaining existing employees. Employees seek new opportunities and stay loyal to their employers in both cases because of salary and benefits. Data from "The Talent Market in Transition Report”, conducted with the SMF, confirmed that salary and benefits are both the top reasons for job-seeking and staying loyal to an employer. Thus, compensation has the dual potential to make people stay or leave.
The cost of getting it wrong
For employers, getting compensation wrong can lead to an exodus of talent or failure to secure the talent you want. The availability of multiple job offers and counteroffers is becoming common, and our recent Ship Management Survey showed that 50% of job changers secured a pay rise of over 10%, compared to just 18% of those who remained loyal to their employer. The margin of error for underpaying is now slim, as even a slight disparity can deter employees.
Transparency and generational impact
Younger generations, particularly Generation Z, are more open and transparent about compensation and benefits in the workplace. They have been raised to discuss their needs and expectations openly. This shift towards transparency is expected to influence workplace dynamics. While other generations may not be as open, this trend is likely to impact all age groups, encouraging conversations around compensation fairness.
You can’t buy loyalty
No matter whether you pay the most, or pay the least, loyalty is complex. There are lots of factors that come into play to create loyalty like relationships, work-life balance, company culture, and career progression, for example. Do not rely on compensation in silos.
But, I have to keep asking myself “Are people just not as loyal as they once were?”
Beyond compensation – think “reward”
The concept of "reward" has become integral to compensation. It's no longer merely an extrinsic motivator but a more holistic concept that includes compensation, benefits, recognition, and appreciation. Employees seek not just monetary gain but a sense of reward that aligns with their values and motivates them intrinsically, the ‘what gets me out of bed in the morning’ factor.
Increased frequency of pay rises
There is growing demand for more frequent pay rises. Our reports tell us businesses are offering more regular pay rises. For example, in our recent ship management survey, 39% of respondents received a pay rise within the last six months, a significant increase from 27% the previous year.
On top of the increased frequency, pay rise percentages are also on the up. Think less pay rises of under 5% and more pay rises over 10%.
I think the days of annual pay reviews and appraisals are long gone.
A focus on bonuses
Bonuses have garnered increased attention as a way to enhance employees' earnings tied directly to their performance. With the intensifying focus on compensation, there is greater scrutiny of the amounts and criteria for receiving bonuses. Businesses are turning to bonuses to retain and motivate their employees.
Influence of bonuses on employee motivation
When businesses perform well, employees can often expect larger bonuses. Companies are increasingly using bonuses to retain employees, showcase their value, and reward their contributions. Across employment reports, bonuses consistently rank as one of the most in-demand benefits.
You aren’t offering enough benefits
Well, that is what employees are telling us. But, you are on to this, and over half of employers we have surveyed say they are actively working on creating new and improved benefits packages.
You can’t value what you don’t know
People frequently don’t know what benefits they are entitled to and nearly 50% said they had never received communications from their employers. Often businesses don’t put a value on benefits that they can communicate with their employees either.
Future predictions in compensation and benefits
Hyper-Local and hyper-specific
The future of compensation and benefits will be characterised by a need for hyper-local and hyper-specific packages tailored to individual employee needs. One-size-fits-all approaches will no longer suffice.
A shift from discretionary bonuses to performance-related pay
Bonuses are transitioning from discretionary to performance-related. In the future more companies will base bonuses on individual and company performance, reflecting the company's values and expected behaviors.
Continuation of counteroffers
The maritime sectors are likely to witness a continuation of counteroffers as companies grapple with talent shortages. Employees will have more bargaining power.
Pay fairness and transparency
Pay fairness and transparency will become the norm, especially with an increasing number of Generation Z employees who are accustomed to open discussions about compensation and benefits.
Rising senior executive pay
A significant number of senior executives plan to change jobs in the coming year, putting pressure on companies to attract experienced talent. This shift could lead to a turbulent senior talent marketplace, putting pressure on executive pay as a way to attract the top people.
Bonus burnout concerns
As the cost of living rises, bonuses are becoming increasingly important. However, there's a risk of employees burning out in their quest to secure bonuses. Companies will need to strike a balance between motivating employees and preventing burnout.
Best practices for compensation and benefits in maritime
I’m often asked to share my recommendations and best practices on compensation. These are my top insights:
Share annual total reward statements encompassing past and potential future earnings.
Create benefits focus groups within your teams to determine attractive benefits, eliminating unused and unpopular ones.
Overcommunicate employee benefits through various mediums to ensure employees are well-informed.
Benchmark your compensation packages to stay competitive but avoid using them as sole retention tools.
Implement regular pay rise criteria, aligning them with what new employers offer.
Embrace smaller, more frequent raises and recognition, keeping up with employee expectations.
Overpaying doesn't guarantee greater engagement or loyalty. Succeeding in compensation and benefits is about making many small, informed decisions and communicating effectively with your employees. Compensation is only one piece of the retention puzzle, which includes relationships, work-life balance, company culture, and career progression.
In conclusion, the maritime sector’s compensation and benefits landscape is evolving rapidly, driven by changing employee preferences, generational diversity, and global economic shifts. Staying ahead of these trends, adopting best practices, and embracing a holistic approach to reward will be vital for maritime companies seeking to attract, retain, and motivate top talent.
This content was originally delivered as a 45-minute presentation for the SMF Connexions meeting in September 2023. If you would be interested in the presentation as a keynote speech or internal meeting, please reach out.