Compensation is defined as the sum of both monetary and non-monetary incentives given to an employee by an employer in exchange for performance. While every company’s definition of compensation may be different, all businesses understand that in order to attract and keep a skilled workforce, compensation must be taken seriously.
Crafting appropriate compensation packages requires considerable thought and planning, and it’s no secret that these plans can be quite costly as your company grows. Keeping the market in mind is also key because, in times of a financial downturn, companies must balance what they offer employees with overall business needs.
With these considerations in mind, companies typically find it easier to recruit employees and leaders when they offer employee benefits packages that stand out from the competition. There are several components to a competitive compensation plan, and they go well beyond just pay and bonuses. Here, we’ll discuss how to make the compensation planning process simpler and formulate benefits packages that attract the right candidates.
Troubleshoot Your Current Compensation Packages
The first step in revamping your company’s compensation structure is to look at your existing compensation packages. Most companies believe that just because an employee has agreed to work for a certain salary or hourly rate that they are happy with their compensation. This is not always the case, and one study even found that 60 percent of employees who feel they are underpaid intend to leave their current place of employment. Often, employees won’t bother negotiating their salaries since the general sentiment is that only C-level executives have real bargaining power.
Employees may be concerned about their actual pay, but if HR takes the time to talk to them, additional issues may be uncovered. In formulating new compensation plans, HR professionals may be tasked with confronting issues such as unequal pay or tenure-based versus performance-based pay increases. By understanding employee frustrations, HR can then begin to create compensation packages that work better for everyone.
Many companies fail to make the connection between company culture and compensation, but the link is there. Restructuring compensation involves looking at the company’s daily operations and their impact on the employees’ lives as a whole. Non-monetary compensation such as telecommuting options, casual dress, and wellness initiatives can go a long way in making employees happier.
HR should work in tandem with executive management by encouraging efforts to achieve overall company goals through better incentives. Employee engagement involves more than a pat on the back, so finding creative ways to encourage employees while still maintaining structure is a goal worth striving for.
Think Outside the Box
When considering innovative compensation strategies, both paid and unpaid, it may be useful to see what other forward-thinking companies are doing. Sabbaticals are one popular incentive that some companies have begun to explore. While still relatively rare, sabbaticals allow long-time employees the chance to recharge with scheduled time away from the office. This time exceeds standard paid vacations and can be used for an employee to pursue a personal goal or travel internationally, for example.
The time period for a sabbatical typically ranges from one to three months and can be instituted as a one-time opportunity or something that occurs on a regular basis. Although on the surface, a sabbatical only seems to benefit the employee, it also benefits the employer because they see reduced turnover and improved creativity. This not only saves money but produces quality work.
Other unconventional compensation methods include broadband pay scales, personalized incentive plans, and knowledge-based pay. HR should be open to exploring alternative compensation, and trying these on a trial basis will help shape future compensation changes.
Compensation Management Software
Large companies have correspondingly large numbers of employees to track. To automate the process, many invest in compensation management software. This sophisticated software usually includes compensation planning models, what-if scenarios, workflow approvals, real-time reports, and a host of other useful features.
While there are numerous choices available, finding the right compensation management software for your company doesn’t have to be difficult. Most software companies offer dedicated sales and support staff who are able to come in and give live demonstrations. Scheduling a demo gives HR and company executives the chance to see how the software works as well as pose specific questions. Common questions will include topics like implementing company-wide salary adjustments, viewing employee benefits data, being mindful of budget considerations, and plugging business-specific guidelines into the software.
If your company already has a compensation management software vendor, your benefits offerings should be regularly reviewed to ensure compliance. Your point of contact will be able to discuss options for proposed changes and recommend the best course of action.
In today’s competitive environment, offering a comprehensive benefits package is no easy feat. Companies that want to attract new talent and retain experienced employees must think beyond wages to get to the heart of what employees want. Companies must also balance employee desires with business goals and develop compensation packages that meet the needs of all involved.