If there were ever a magic button you could press to attract, retain, and incentivize your employees in one fell swoop, a well-defined compensation plan would be it! It is by far one of the most powerful yet underrated tools to positively influence employee behavior and win at the talent game.
While the "right" plan will look different for every organization, here are six ways a well-designed compensation plan can benefit your company.
- You’ll have better success attracting talented employees.
Highly skilled, in-demand job candidates are likely to know what they are worth in the job market. Although pay is not the only factor they consider when assessing an opportunity, a well-thought-out pay package can make your offer irresistible.
- You’ll be able to reward your top performers in a way that is meaningful to them.
Compensation plans that link rewards directly to job performance can effectively motivate employees to perform at a higher level. Rewards can take many forms, including merit increases, promotional opportunities, professional development, and perquisites (perks).
- Your employees won’t quit at the same rate they used to.
Compensation is among the top reasons people leave their jobs. A new Pew Research Center survey finds that low pay, a lack of opportunities for advancement, and feeling disrespected at work were the primary drivers of employee turnover last year. The survey also finds that those who quit and are now employed elsewhere are making more money in their current job.
- Your employees will understand exactly how valued they are within the company.
Employees are more accepting of their pay when they understand how pay decisions are made and believe that everyone in the organization is subject to the same system. Without transparency, employees tend to feel that their compensation is controlled by their manager rather than by an organization-wide system.
- Your managers will do better at supporting and communicating compensation information.
Compensation plans provide managers/supervisors with a “cheat sheet” to help them confidently explain compensation decisions and specific components that make up each employee's compensation package.
- You’ll reduce your litigation risk.
Developing a compensation plan will help identify gaps in your pay practices. Employee compensation should be determined clearly and objectively without favor or prejudice against any religion, ethnicity, gender, or similar factors.
Having a well-designed compensation plan is more critical today than ever before.
Several states and cities have begun to enact laws that require employers to disclose salary information to current and prospective employees. Consequently, your company’s pay practices could be open to external and internal scrutiny. As a small business owner, you can use this as an opportunity to define and communicate a compensation program your organization is proud of.
If you are interested in learning more about harnessing the power of a well-designed compensation plan, then click here to watch a replay of the Effective Compensation Planning for Small Business Owners webinar.
In this presentation, we share best practices for using compensation as a tool to attract, incentivize, and retain top talent. We also review recent pay transparency laws, discuss how your organization can be compliant if affected, and address common issues around maintaining internal pay equity within the organization. Topics include:
- Basic compensation planning
- Trends in pay transparency laws
- Job board requisitions and preparing for compliance
- Employer/Employee perspective
Top talent sourcer, HR consultant, and municipal search advisor. Passionate about helping clients meet their hiring goals and leading her team to the charge.
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