7 Things You Must Consider When Building an Employee Compensation Strategy
One of today’s most important viewpoints in running a business includes understanding that you must treat your employees well so that your customers will be taken care off. One of the ways in which you can treat your customers well is by looking into the various ways in which you can compensate them. This is actually an opportunity for you to motivate your employees. Therefore, it should be used creatively as possible so that you not only motivate your employees but also maximize their efforts so that they operate efficiently.
Compensation is one of the basic elements in incentive-driven employment. The extent you go to in order to compensate your employees shows how much you care about your business, which is by looking after your greatest assets, your employees. Below are 7 things that you must consider when looking in to an employee compensation strategy.
1. Budget Allocation
Your budget allocation must contain incentives alongside a salary. In fact, when you put down salaries as part of your budget, it should include the percentage for incentivized pay out rewards.
For example, if you have a budget of $2000 for compensation, and if 90% makes up the fixed salary and you set aside 10% for benefits, that 10% is spent according to the following breakup:
- 7% on health benefits
- 2% on retirement savings
- 1% on tuition reimbursement
2. Develop Salary Ranges
You must have a salary range decided, as this is the standard means of organization viewing and managing employee pay and benefits. Your compensation strategy must result in motivating current employees attracting new talent.
With this approach, your work will not break down and you won’t suffer labor scarcity because you will have a good name in your industry. This is why developing salary ranges is termed as critical to guaranteeing employee pay remains competitive against other organizations in your industry. In order to remain competitive, it’s mandatory to benchmark similar jobs within your industry and develop a pay structure.
You can create salary ranges internally by doing some research or leveraging sites such as salary.com or payscale.com in order to determine average salaries that are paid in to workers working in a certain geographic area.
3. Salary Audits
Salaries must be reviewed in order to determine how much salary scales have changed for a particular job in a particular region. This is important as pay scales do fluctuate, and organizations must ensure that salary ranges reflect current compensation trends.
4. Benefit Package
Some organizations retain employees through creating benefit packages which are implemented alongside salary payouts. Benefits that are usually offered to employees include percentage or complete funding for health, retirement, tuition reimbursement as well as others. These are used as a marketing pitch to prospective employees at the time of their interview, especially when an organization discovers that there is someone at their doorstep whom they really would like to have on board.
5. Performance Management System
Develop and implement a structured performance management process that will help employees meet corporate objectives and help with assessment regularly. This process must include annual goals, annual performance appraisals as well as structured process for developing employees.
6. Legal Compliance
A good employee compensation strategy must incorporate legal requirements to make sure there iscomplete compliance with all laws.Such a structure would do away with natural biases that do occur at the time of making hiring decisions and result in compliance with minimum wage, overtime pay and other important laws.
7. Structured Administration
Developing a structure is most important for your business process. There should be:
- An annual review process
- A salary audit
- Adefined raise timeline process
Through this, you can make sure someone is responsible for ensuring that all areas are completed, which is obviously critical a successful compensation management process.
Organizations today must realize that an employee compensation strategy is a foundation stone to long-term business success. It holds the power to create an environment that recognizes employee efforts and rewards them proportionally. An organization can only be strong and have long-term success if it has a solid structure beginning with its approach to hiring the right people and establishing clear expectations while having the ability to recognize and reward employees for good and outstanding job performances.