There’s no denying that compensation is a key workplace motivator.
Not only can insufficient compensation be a roadblock to your recruitment process, it can also have a serious impact on retention. And while many leaders say they realize the value of compensation positioning, few take a truly strategic view of it.
Many companies determine salaries on an arbitrary basis and forget about the big picture. If you don’t take the time to devise a well-conceived compensation strategy, you’ll run a number of risks that could be detrimental to your business. First, an absent compensation strategy is likely to create issues with your ability to retain your current staff. If workers come to realize that pay doesn’t seem to be equitable, they’re bound to seek employment elsewhere. The same holds true if the salaries you’re paying are well below the average for your industry and/or market. Lacking a compensation strategy will also impede your efforts to attract top talent. Again, if your offers fall short compared to what the competition is offering, getting qualified new hires to come on board is going to be a hard sell. That’s why it pays to focus your efforts on developing a strategy that focuses on recruitment and retention, as well as your company’s available resources.
Who are your employees? Compensation strategies should differ depending on where an employee is in his or her career. What appeals to a millennial probably won’t hold the same value for a baby boomer in a managerial role. Similarly, what motivates a mature worker eying retirement may not be of interest to a father or mother with young children. Any effective compensation strategy should be flexible enough to address the financial needs of the life cycle that particular employee is in. It’s also smart to think about who you wouldliketo hire. What attributes and skills does he or she possess? Create a clear picture of the qualities of the employee you want to attract before you begin formulating your new compensation plans.
What do you want to achieve from your compensation program? Is your goal to outspend the competition? Pay just enough to remain competitive? Reward certain behaviors? Answering these questions will help to keep you on track as you establish your guidelines.
Do your research. How does your current compensation shake out? Is it in line with the industry standard? Will present and future employees be motivated to work for you? Figuring out where you stand now will provide a baseline for developing your new employee compensation strategy.
How will you go about salary increases? Aside from establishing salaries, you’ll also need to determine how you’ll go about increasing them over time. Will raises be market-based? Performance-based? Tenure-based? A combination of all three? Putting these guidelines in place ensures a system with less bias, which builds trust and encourages employee loyalty.
Don’t forget the big picture. These days, workers want more than just a paycheck—they also want benefits that allow them to enjoy their lives more fully. Figure out how much you can afford to allocate to workplace benefits and choose the ones that are most likely to have the greatest impact. This is where small business and start-ups might feel that they can’t compete on the monetary side with their larger counterparts. In this case, benefits that are lower in cost but offer high value can help. Think flexible work schedules, free snacks, wellness programs, additional training opportunities, and the ever-popular potential for profit sharing.
Keep in mind that money doesn’t always talk. It’s true that if the level of pay falls below a certain threshold, it will have an adverse impact on both talent attraction and retention. But very high compensation level isn’t necessarily beneficial. Many companies that pay “top rates” have to do so to compensate for factors such as a poor reputation, an unappealing organizational culture, or the limited growth potential of the sector. In these cases, paying high salaries probably isn’t sustainable over the long haul because it’s ultimately culture and opportunity that retain great people.
Developing a compensation strategy takes time, but it’s a worthwhile investment.
It can help to create a culture of transparency and fairness, as well as boost productivity, employee engagement, morale and retention.Remember that your talent is your top competitive advantage, and compensation is only one way you show employees how valuable they are to your organization. Do you need help designing effective people-first compensation strategies for your organization? Please reach out to our friendly team of skilled professionals for guidance.
About The HR Team: Founded in 1996, The HR Team is a Maryland-based human resources outsourcing firm committed to developing strategic, customized solutions that respond to the unique needs and cultures of organizations of all types and sizes. Available as a one-source alternative to an in-house HR department or on an à la carte project basis, the company’s flexible service models address the full spectrum of HR needs that many organizations struggle to address. The HR Team helps clients achieve their highest level of success by providing value-driven human resources services that leave them time to focus on what they do best: directing business growth and profitability. Headquartered in Columbia, Maryland, the firm serves all of Maryland, Washington, DC, and Virginia. Tolearn more about The HR Team, call 410.381.9700 or visit https://www.thehrteam.com/.