For all the wonderful attributes our Green Industry brings to our world and the careers of its employees, we continue to be highly challenged in attracting and retaining qualified talent.
There are many Human Resource solutions to improving and retaining talent flow. Unfortunately, no one magic answer will fit all companies or their employees. Additionally, one topic in the equation is often uncomfortable or sensitive to discuss: compensation.
In developing an attractive compensation and benefits program, it is important to understand the current economics involved, where to keep educated on compensation and benefits trends, set your specific company total rewards plan, and execute in an engaged manner with your valued team.
The Economics
We recently hired several positions across the country that were quite challenging due to the compensation set being below market. It is notable that compensation was not below market five to seven years ago, but more importantly, the compensation for these roles has not increased since then.
Why does this matter in attracting talent? Understanding the economics of The CPI inflation calculator, which uses the Consumer Price Index for All Urban Consumers, sheds light on why. This data represents changes in the prices of all goods and services purchased for consumption by urban households.
A $65,000 Head Grower salary in January 2017 has the same buying power as $84,395.69 in September 2024.
A salesperson’s salary of $80,000 in January 2019 has the same buying power as $100,210.80 in September 2024.
These CPI numbers do not consider the additional increase effect of our country’s high cost of living areas.
As compensation relates to retention, turnover costs companies six to nine months of an employee’s salary on average to replace them. Recent research by Harvard University revealed that increasing pay among warehouse workers by just one dollar per hour resulted in a 2.8% retention boost. Results also showed that every dollar-per-hour pay loss caused a 28% increase in turnover.
While lower inflation may ease some pressure, many organizations are still catching up from the past couple of years of cost-of-living adjustments. Balancing real earnings growth with competitive compensation will be vital to moving forward, especially in industries still feeling the pinch. Employees continue to struggle to get ahead from the high inflation years, and employers must keep that in mind. When merit increases exceed inflation/cost of living, employees gain. Then, when inflation/cost of living exceeds merit increases, employees lose. While many employers have provided higher increases in the past couple of years, more is needed to keep up with inflation. As a result, it takes employees a few years to recover from higher inflation times. However, employees seem to forget that they make up ground when increases are higher than inflation; eventually, it all balances out.
Many companies focus on adjusting pay based on market competitiveness and talent retention rather than on inflation alone. Every organization needs to look at their own situation and not just what everyone else is doing. The hope is that lower inflation facilitates more substantial salary increases. Typically, most employers see it as an opportunity to lower salary increases. If they do, they might struggle to attract and retain talent. We know we have been in a talent shortage for many more years simply because of the lack of people to fill the jobs continuously becoming more available due to massive baby boomer retirements.
Where to Remain Educated
One of the best ways to keep up with compensation and benefits trends is to read industry reports from reputable sources such as SHRM, WorldatWork, Mercer, or Willis Towers Watson. These reports provide insights into the current and future state of rewards, including salary surveys, benefits benchmarks, best practices, and emerging issues.
Gather market data for your jobs that is specific to the demographics of where your company is located. (HR associations, staffing firms, and the U.S. Bureau of Labor Statistics are excellent resources for this information.) Review the going rates for similar positions within comparable industries, companies, and geographies to establish your pay scale. Conduct a study like this at least annually to ensure you can maintain competitive compensation for all employees.
Develop a Total Rewards Strategy
If you don’t have the salary budget to stay ultra-competitive, rest assured that there is more to the employee experience than compensation.
Gone are the days when compensation or hiring decisions were made based on salary history; 22 states plus 23 localities and counting have passed legislation banning employers from asking candidates for this information or basing hiring or promotion on the candidate’s current compensation. Hiring managers: please do not ask this question any longer!
Should the unemployment rate remain low for the next five to 10 years, labor shortages will persist, especially in industries such as horticulture that have a vast number of retirements occurring. That said, bumping salary budgets alone won’t be enough to address recruitment and retention challenges. As a result, employers need to be creative and comprehensive with their total rewards strategy, which comprises compensation, benefits, developmental opportunities, recognition, and other rewards that motivate staff and enable a top-notch employee experience.
The best approach to identify which benefits will attract and retain your employees, especially with so many earlier generations joining the horticulture industry, is to simply ask them which benefits they would value! In a smaller company, this can be done with one-on-one conversation, and with a larger employee base, there are many effective survey resources to gather this feedback.
Per SHRM, there are 216 benefits companies serving employees up from 175 just 2 years ago. Consider offering benefits that better match what your employees want today, such as health benefits, well-being and family caregiving support, pet insurance, and financial planning services in your total rewards strategy. Invest in workers’ professional development with the idea that you can enable brighter futures through upskilling, internal career paths, or debt-free education.
To set employee pay, first, determine your pay philosophy. Do you want to lead, match, or lag the market? The most common pay philosophy is matching the market, which involves paying at the 50th percentile or the median market rate. You may also apply different pay philosophies for different roles. For example, it’s extremely difficult to hire qualified Head Growers, Drivers, or Sales professionals who come with a “book of business,” so you’ll likely need to lead the market or pay more than the 50th percentile to attract candidates. Other roles in your community, such as Customer Service, may have plenty of qualified candidates that allow a company to match or lag the compensation.
Compensation can be hourly, base, performance (bonus, commission), or long-term. Performance goals should be both meaningful and achievable! A meaningful bonus program is aligned with further creating company value and properly calibrated between expected job performance and what is performance that excels beyond the expected. Achievable is reasonable given the market environment, realistically attainable, and linked to realistic budgets. For example, we know a few companies expecting 15% plus sales growth in 2025 in the horticulture industry for their sales team to bonus. Reasonable? As for attainable, ask yourself one question: if the person in that role would not achieve the minimum threshold for bonus, would you have to fire them? Harsh, but this helps keep the “realistic” element in a bonus target.
Identifying the right Compensation and Benefits program for a specific business involves many intricacies. Don’t hesitate to collaborate directly with a professional who provides tailored compensation and benefit research and strategy for your specific business and geographic area. While larger firms such as Mercer and Willis Towers Watson provide immense value, so do smaller ones such as Total Rewards Solutions, founded by Cassandra Faurote. As a resource, her book, Compensation Sense 101: Common Sense Answers to Your Questions about Employee Compensation and Total Rewards, presents a Q&A format with 8 chapters that provide answers to your compensation and total rewards questions. It is SHRM-approved for HR Professionals.
Click here to get your copy of “Compensation Sense 101” (Amazon.com)
Execution and Follow Up
Communication. Transparent communication. Once any compensation or benefit plan is revised or created, true success is ensuring that all the employees are provided full details of the plan, have all their questions answered, and, if benefit related, have clear directions on how to utilize the benefit.
Performance-based compensation (bonus/commission), as it relates to specific employees, should be communicated with specific metrics required to attain the bonus or commission goals. This means explaining why the metrics are meaningful to the overall business and realistically achievable for the employee.
At the start of every year, you should review your employees’ duties and salaries to confirm they are correctly classified as exempt under federal and state wage and hour laws. Benefits should be reviewed annually and, at minimum, every two years, depending on the size of the employee base.
The right compensation and benefits program for your company is an essential solution to attracting talent and retaining your current teams. Investing time to keep your total rewards package current with employment market and employee expectations is time well spent.
Todd Downing is a Managing Partner for Best Human Capital Advisory Group and leads the Horticulture & Green Industry executive search and advisory services. He has more than 30 years of experience in the industry and a passion for supporting its continued professional growth.