Talent Recruitment Has Changed: What it Means for Peer Groups, Benchmarking and Employee Experience

Published: April 2021


The increase in remote working has opened more labor pools across regions while also driving greater competition for the same talent. Here are three areas firms should re-examine to attract new hires.

The rise of remote working is poised to again disrupt the talent landscape, just like globalization changed the way organizations recruited and competed for talent throughout the 1980’s and 1990’s. Regardless of whether an employer lets workers continue working from home indefinitely, enacts a hybrid working approach, or brings all employees back to the office, the rise of remote work will permanently disrupt the talent pool.
Our recent project with a diversified products firm based in the Midwest region of the United States (U.S.) illustrates unexpected implications of this dynamic. Our client decided to bring its employees back in person as the firm recovers from pandemic-related disruption through a phased approach following local health and safety recommendations. As part of that transition plan, business leaders began to assess changes in the local talent pool to support business growth. The firm was initially looking at benchmarking pay for talent only against local competitors since they intend to hire locally-based candidates and have everyone work in person. We advised the client to supplement their traditional analysis with an expanded peer group to cast a wider, geographically dispersed group of competitors. This is important because our client is hiring job roles that were traditionally found in the technology sector (e.g., software developers, data scientists, robotics engineers). Therefore, even if the firm doesn’t hire outside of its headquarters location, they will be competing with technology companies across the U.S. that may recruit employees in the Midwest for remote-based jobs.
“Even if you don’t want to have a remote workforce, you need to realize your local talent pool is getting more constrained. Peer groups need to get bigger, and firms must realize they are competing with companies offering different employee experiences,” says Tim Brown, a partner in Aon’s human capital practice.

A broader talent pool means companies must revisit their competitor peer group, re-examine their approach to compensation benchmarking and focus on their employer brand and employee experience — an acute challenge for employers with a significant portion of remote employees. In this article, we’ll dive into each of these issues.

Should Your Peer Group Get Bigger?

As our client example illustrates, whether a company is continuing to let employees work remotely or bringing them back to the workplace, the number of companies that any business will compete with for talent is likely to expand in the future. A Silicon Valley startup may look to hire remote workers based in Des Moines, Iowa, for example, which has a small but burgeoning tech scene, is in close proximity to universities and has a robust manufacturing industry where workers have been reskilled for digital jobs. Before the pandemic, most local businesses in Des Moines would not have included a Silicon Valley startup in its peer group; however, today, there is good reason to reconsider.

Indeed, a poll conducted in 2020 and 2021 by the venture capital firm Initialized found surging interest among startups to launch a company with fully remote employees. Startup founders were asked if they were to start a company today, what location would be the most beneficial place to be based for the company’s long-term success. In 2020, 41% said the San Francisco Bay Area and only 6% said distributed or remote from the first day of operation. In 2021, respondents choosing remote jumped to 42% while the Bay Area declined to 28%.

With so many companies competing for talent across the U.S., how do peer groups remain small enough to serve their purpose of providing a targeted list for benchmarking purposes, but expansive enough to provide a realistic picture of frequent competitors for talent?

While there's no perfect formula for determining the most precise peers, guidelines certainly help. We recommend having a broad-based peer group of at least 40 to 50 talent competitors. (Executive peer groups are usually smaller with between 12 and 20 companies.) Most companies review and make necessary changes to their peer group annually, typically in the summer for companies with a calendar fiscal year. However, more substantial changes are warranted at times when there is a major company-specific event, disruption in the market or widespread workforce shifts — as we are experiencing today.

Benchmarking Rewards for an Expanded Talent Pool

While the talent pool is becoming broader and more fluid, most companies still target compensation based on geographic pay zones. Prior to the pandemic, 54% of organizations said they used geographic differentials to adjust pay levels based on an employee’s location. When we surveyed companies in December 2020, nine months into the pandemic in the U.S., 37% had or were considering adjusting or expanding geographic differentials in response to a more remote workforce[1].

“We have heard from clients that they are taking a wait-and-see approach to their compensation plans, but they need to be ready because the number of employees working remotely is expected to at least double compared to the workforce prior to the COVID-19 pandemic,” noted Octavio Cardenas, a partner in Aon’s human capital practice, who spoke at our recent webcast, Innovative Human Capital and Reward Strategies in the Tech Sector.

With an expanded peer group, it may be necessary to benchmark rewards in a couple ways. First, consider benchmarking pay for new hires based on the local market and what local peer competitors are offering. Second, look at the types of total rewards being offered among the full list of peers and consider what they are offering beyond starting salaries and incentive pay. Here are some questions to consider:
  • What are the work-from-home policies of competitors?
  • What are their in-office perks like for employees going back to the office?
  • Do they offer generous health and benefits packages or flexible working arrangements?

Refocusing the Employee Experience

One of the key differentiators for attracting talent in a more competitive landscape is providing a compelling employee experience. That can be harder to do in a remote working environment, but there are some experiences that become even more important in a virtual working environment.

“When we were in the office it was easier to pick up on employee engagement and overall wellbeing,” remarked Brooke Green, leader of employee rewards for the human capital practice, who also spoke during the webcast. “Seventy-seven percent[1]. of companies are telling us employee wellbeing is a focus for them this year. That tells you right there how important this issue is to organizations today.”

When it comes to attracting talent, leaders can emphasize the firm’s brand, culture and rewards that resonate in this environment. These include technology collaboration tools, flexible working schedules and managers that have the tools and training they need to effectively lead dispersed teams.

Studies in the past[2] indicated that remote employees were less likely to receive promotions than in-person workers. Today, with so many employees working remotely on a hybrid or permanent basis, it is urgent that companies review practices to ensure a level playing field for all everyone. In our recent pulse survey, 69% of respondents say they are evaluating or updating performance management and workforce use of tools and technology as part of their future-of-work strategies.

A company can’t afford to do it all when it comes to rewards, so the employee experience is increasingly important. Ensuring a company’s brand is strong and perceived accurately by prospective employees will help a firm’s talent acquisition strategy, which must rapidly evolve in a virtual working environment.

[1] Aon COVID-19 HR Pulse Survey #6, conducted in December with 1,484 global respondents, 70% of whom are based in North America.
[2] hbr.org/2018/11/survey-remote-workers-are-more-disengaged-and-more-likely-to-quit

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