Emotional compensation is one of the most heard terms in the human resources departments to ensure employee retention. The younger generation of professionals has a lot to do with it. They are sure of one thing: not everything is about money

New talents look for more than a vast salary; they ask for flexibility, recognition, and growth. They want to relate to their company values. Emotional compensation is all about these benefits, and offering the right one in your business will be key to ensuring employee retention. 

What is emotional compensation?

Emotional compensation is a non-monetary retribution that has a positive impact on employee wellness. It also indirectly increases their purchasing power and ends up being an important way for employees and their families to save.

In other words, emotional compensation gives workers privileged job conditions. It is based on meeting seven universal human needs that allow people to thrive at work:

  1. Respect.
  2. Recognition.
  3. Meaning.
  4. Belonging.
  5. Autonomy.
  6. Personal growth.
  7. Progress.

That is why emotional compensation has such a great impact on employee retention! Its main goal is reaching a great working environment and increasing employee productivity. All these by offering the workforce benefits as important as their payroll. Benefits which are really appreciated by younger professionals. 

Employees not only care about economic incentives. They must meet the seven universal human needs to be satisfied with their job. They want to learn, grow and contribute to society. The workforce also wants to feel appreciated by their employer. All these interests are wrapped by emotional compensation. By covering all of them, you are stepping into increasing employee retention!

Emotional compensation types

There are different ways to classify emotional compensation. We have gathered some examples.

Flexible salary and benefits

This type of emotional compensation increases the employees’ saving capacity. Creating a flexible salary and benefits program is a great choice in this case.

These programs allow employees to save considerable amounts of money on expenses they must incur.

A flexible salary also reduces the amount of taxes an employee must pay, because these types of benefits don’t increase the taxable base. In other words, they appear in the payroll as deductible expenses, exempt from taxation. Childcare or transportation tickets are good examples of these salary benefits.

Salario emocional para alcanzar un equilibro laboral personal

Promote a work-life balance

One of the main factors that impact employee retention is the possibility of achieving a work-life balance. It has turned out to be decisive for younger professionals.

Companies need to design employee wellness programs tailored to their team’s needs. They need to make sure that they include two key advantages in this program: flexible working hours and remote work. These are triggers to increase employee retention and engagement.

Improve physical and mental health in the workplace

A decade ago, promoting physical activities was key to increasing employee retention. Today mental health has turned out to be the main character. A company capable of preserving the mental and physical health of its employees, will enhance employee productivity and boost their professional growth.

This is why corporate wellness plans now include benefits such as:

  • Health insurance with great psychological coverage.
  • Yoga classes.
  • Gym passes.
  • Vouchers for meditation apps.

All these are examples of promoting wellness in your company. It will increase satisfaction and in consequence employee retention. If this wasn’t enough, improving physical and mental health also helps fight workplace burnout

Increase employee engagement

Increasing employee engagement is not easy peasy if your team isn’t aligned with the company’s core values and objectives. Turning this around requires putting employees first. They must be the center of the company and HR strategy. By doing so, employee retention will considerably increase.

In order to boost engagement, you need to start by building a feedback culture and giving a voice to employees. They’ll be able to share their needs, thoughts, and concerns. By the time they notice how their experience as part of the company improves thanks to their feedback, they’ll feel like a valuable part of the team. This will make them want to stay and thrive with the organization, increasing employee retention!

New guide! How to make feedback a habit in your company

This type of emotional compensation also needs to think about promoting professional development. Employees want to feel they are growing and contributing to decision-making. All these are expectations that professionals want to fulfill in their working environment.

Empleados satisfechos gracias a un buen salario emocional

Perks of offering emotional compensation for the company

There are some, and worth it, advantages that a company can achieve by offering an emotional salary: 

Improve employer branding

Emotional compensation has a positive impact on employer branding. In other words, it enhances the perception employees and candidates have about the company. It directly increases engagement, retention and talent attraction. 

Increase productivity

Someone who feels good about themself, the work environment, and their employer, will work with more passion. This causes an increase in employee productivity and efficiency. It also has a positive impact on innovation, problem solving and development.

Boost employee satisfaction

A satisfied team is worth its weight in gold! It helps ensure employee retention, reduces turnover, and attracts the best talent. Furthermore, it is a reflection of having a great organizational climate. How many times have you heard someone doesn’t have the highest payroll but that they love the work environment? Emotional compensation is the first step in increasing your team’s satisfaction.

Emotional compensation examples

We have mentioned some examples of emotional compensation, but here are the most important benefits you can include in the one you offer to employees.  

1. Flexible working hours to ease a work-life balance.

2. Remote or hybrid work, a step further into smart working

3. Days off for those employees who are close to burnout, with personal problems, or need a break. 

4. Provide all the tools employees need, even if they work remotely. Mouse, chair, desk, or any type of software that facilitates their duties. 

5. Create a career path for each employee. It should include a training program and promotion possibilities. 

6. Training options or economic benefits for studying. Help them out if they want to develop their skills or learn a new language

7. Continuous improvement of office equipment, make sure they have everything they need to be more productive and efficient. 

8. Social benefits for employees, so their experience in and outside the workplace improves. 

9. Employee recognition for their great job, commitment, team management, innovation or productivity. 

10. Positive company culture, that gives each employee a voice. 

There are a lot of emotional compensation examples. But each day the workforce keeps demanding more, making it a decisive factor for them to choose to stay in a company. That is the reason why offering real benefits, that meets workers’ expectations, is key for employee retention and talent attraction.

Lider de RRHH recursos humanos haciendo un plan para mejorar el desempeño laboral

How to establish emotional compensation in your company

It is true that there isn’t one true methodology to establish an emotional compensation program in your company. But, there are some steps and good practices you can follow to start with it. 

1. Set a budget that suits the team and company’s needs. In this case, new compensation plans for employees give organizations a great advantage. They ease establishing a good emotional compensation, even if there isn’t a huge budget for it.

2. Design an attractive emotional compensation plan that meets the team’s expectations to ensure employee retention. It also needs to help attract talent to the company. You need to define which advantages and services will be more welcome. So yes, deeply knowing your team is a MUST!

3. Find the perfect ally to establish emotional compensation. New digital tools for flexible retribution and social benefits are of great help. These provide technological resources to automatically manage employee and HR department consumption.

Turn emotional compensation into a key factor in your engagement strategy. It is a way of optimizing the employee lifecycle to enhance their working experience. It will make the team feel better about themselves and their work environment. All this will end in a satisfied team and an HR department that succeeds in ensuring employee retention.