By O’Brien McMahon, Senior Vice President of Lockton’s Total Rewards Practice


Unless you are Apple, the New York Yankees, or you absolutely blow your competition out of the water and own your market segment, odds are someone out there is willing to pay your people more than you can afford. Even a year into a global pandemic, the competition for top talent continues in most business segments. Everyone is trying to find the message, the package, the secret sauce that brings the best and brightest to their organization. The war for talent rages as fierce as it ever has.

How do you compete if you aren’t the 800-pound gorilla in the room? How are you supposed to keep up if you can’t match the compensation or benefits packages your competitors are offering? Should you just give up? Sell out? What are your options?

The good news is that in business, the little guy wins all the time. There are ways to recruit and retain top talent even when your budget is thin.


Step #1: Do your best to meet the basic needs of your employees.

Compensation, healthcare, and other benefits are important. Just because you can’t afford to max them out doesn’t mean you shouldn’t give them careful consideration. These “total rewards” are what every one of your employees will use to build and protect their life and lifestyle.

Compensation – People want two things when it comes to compensation; security and fairness.

Financial insecurity creates uncertainty and stress. The foundational thing you can do for employees is help them live safe and secure financial lives by paying them appropriately. What is appropriate?

That’s for you to decide. But remember $80,000. That is roughly the point at which most individuals feel free from the distraction of financial burden and begin to experience more positive than negative emotions (1). If you can’t afford to pay your early career/frontline employees that amount, that’s ok, but keep in mind that they will likely have financial stress that takes their mind off work. Financial education and other support may go a long way toward increased productivity and employee retention.

For more senior employees, you’ll likely have to pay more than $80,000. Keep an eye on the industry and geographic benchmarks and do your best to land between the 50th-75th percentile. This will keep you in a range most people consider to be “fair compensation” and won’t automatically disqualify your company from their search (or prompt them to jump ship).

Healthcare – Health benefits protect employees and their families during their most vulnerable moments.

If you have limited dollars to spend, make sure you are putting them into decent medical, dental, and long-term disability plans. Disability? Yes. One in four employees can expect to be out of work for at least a year due to a disabling condition between ages 20 and 65 (2), yet it is one of the most overlooked benefits during enrollment.

Once you have provided these basic protections, you can decide whether to contribute to other benefits. You can also choose to make them voluntary. Employee-paid benefits can still be valuable to employees and they make your overall benefits package more appealing.

Retirement – We all want to age well and live happily ever after.

Unfortunately, most employees are grossly unprepared for retirement (3). While this doesn’t seem like it should be your problem as an employer, it is. Employees forced to continue working past retirement age cost health and disability plans significantly more, not to mention the lack of productivity that comes with an employee who doesn’t want to be there anymore. Even if you can’t afford a 401(k) match or profit-sharing plan, defaults like auto-enrollment and auto-escalation have a material impact on employees’ ability to save for retirement (4). And target-date funds are a great way for their money to grow in a thoughtful way.


Step #2: Be open and honest about your shortfalls.

Once you’ve determined what you can afford to pay, be honest with employees and candidates about it. People can smell B.S. a mile away, especially when company leadership tries to “spin” the message. It’s better, to be honest. Tell your people about the thoughtful planning that went into their rewards package. Explain the trade-offs you made and the intent behind them. If you’ve planned with their best interests in mind, they’ll feel it. People are much more likely to trust you if you tell them the bad with the good.


Step #3: Focus on what really motivates people.

Money does not equal performance. People will decide to come and go based on their compensation, but they won’t work meaningfully better or harder because of it. What increases performance? According to Daniel Pink in his book, Drive, people are motivated by Mastery, Autonomy, and Purpose (5). So give it to them. Give people a path to pursue mastery in their craft. As they demonstrate ability, step back and give them autonomy to do the job their way. Help them see the impact of their work by demonstrating the greater good being done by their contribution (both internally and externally).


Step #4: Lead.

According to former Navy SEAL and leadership guru Jocko Willink, “there are no bad teams, only bad leaders”(6). Strong leadership creates great talent. Sports teams lose every year with stacked, expensive rosters. They are beaten by the teams who come together to perform when it matters. What drives that cohesion, that performance? Leadership. Don’t get down on yourself because of what you can’t afford. Focus on building your people into the best they can be and rally them together toward your cause.

You can win in business from the underdog position. It happens all the time. Underfunded upstarts innovate, service, and hustle their way to the top. You can win, too.

Remember, not everyone will be a fit for your organization and your organization isn’t going to be a fit for everyone. A high-quality person turning you down or leaving the company isn’t necessarily a sign that you are doing things wrong or not paying enough. If you’re thoughtful about what you offer, communicating regularly and transparently, and leading your people with purpose, you have a great shot at long-term success.


This article was written by O’Brien McMahon, Senior Vice President of Lockton’s Total Rewards Practice.








O’Brien McMahon is a Senior Vice President with Lockton’s Total Rewards Practice. He works with companies across industries to design and implement benefits, compensation, and retirement plans. Additionally, he hosts People Business w/ O’Brien McMahon, a podcast focused on all aspects of human behavior and performance in the workplace. Join the conversation at