If you’re looking for innovative methods to draw and keep employees while maintaining financial stability in a volatile market, look at your compensation plan.
In reality, based on recent research from Mercer, 77% of businesses plan to improve their compensation and benefits plans by 2023. Employers offering an attractive total compensation package will have much easier hiring of new employees. Indeed, the best talent will compete to be employed by your business and allow your company to select. This is in sharp contrast to other businesses that cannot receive an application for job openings.
However, putting together an effective plan for compensation that’s guaranteed to be a hit isn’t all about giving high wages. It should be a thorough, well-thought plan describing every aspect of how your business is compensated and why each is important to your business and your employees.
After you have developed a solid compensation plan, implementing it is the next step. By centralizing the internal policy documents, including performance management, policy documentation, and payroll, in one place, BambooHR makes it simple to provide a seamless experience for employees. Learn the benefits of our HR Software today!
What Is a Total Compensation Package?
A complete compensation package contains much more than a paycheck or a salary. The total compensation package can comprise cash and other forms of compensation, such as retirement contributions to accounts, profit sharing, and many more.
Companies that can clearly explain their complete compensation plan by presenting a digital offer could increase the number of applicants who are eventually hired.
Two different types of compensation options can form a complete compensation package:
Direct compensation is the cash compensation employees receive. This refers to an employee’s base salary and bonus pay due to overtime or holiday shifts. It can also include merit-based compensation, such as bonuses for outstanding performance. When people hear “compensation,” they most typically think of direct payment.
Indirect compensation is the other kind of compensation companies may offer in addition to cash. This can include equity shares in the company, such as stock options, and profit sharing. Other instances of indirect pay are paid sick and vacation days and health insurance, workers’ compensation, and various other non-monetary benefits.
Salary Is Still the First Step
Salary is the main element of a compensation plan and is the most significant portion of the total compensation package, including bonuses, benefits, and perks comprising the remainder of the compensation (we’ll examine each in later sections). Salary comprises:
Pay-based (hourly wage or annual salary).
Paid raises in advance in the event of a need.
Base Pay: Fairness Is the Ultimate Goal
Base pay can be a bit tangled; however, the best option is to use reliable market data to determine the minimum as well as the median, and maximum salary for similar positions. This will help you establish the pay range for each position within your company that is reasonable and appropriate for your industry. You can decide to pay below the, above, or even at the market rate, but this is contingent on the overall budget for compensation and how competitive the job market is in your sector.
Without any market data, relying on the wrong assumptions or inequitable, subjective criteria to establish your pay ranges is too easy. For instance, employing an employee to determine the degree of pay for it. This approach can put your company on the verge of being harmed in a variety of different ways, including:
You may end up paying wage levels that you don’t think are competitive and eliminate skilled employees.
In the same way, you will not be able to draw in good candidates with outdated wage rates.
It is possible to pay more for specific roles.
It is possible to be charged with discrimination in the workplace.
Market-based pay ranges allow you to ensure that you have fair pay for all pay decisions and can aid your business to stand apart as an employer who is committed to fair and equitable compensation:
You’ll be more mindful and consistent with handling your wage issue.
You can lessen the chance of bias in salary decisions.
You’ll be better equipped to assist employees in understanding why and how they’re paid according to how they’re compensated.
When you have fair pay based on data as the base of your compensation plan, your company can make difficult decisions, such as adjusting salaries due to the inflation rate.
Frequency of Pay: How to Support Employees Through Scheduling
Suppose you’ve already established fair pay rates. In that case, that does not mean you don’t have options to enhance this element of your compensation plan to make it more appealing to employees who are currently employed and those looking to join. We’ve discussed before that base pay is only part of the salary an employee earns.
You can alter the amount of time you pay employees, such as making weekly pay instead of bi-weekly or monthly, to make employees feel more financially secure. In sectors that have high turnover and difficulties in attracting employees, some employers are opting to start paying their employees daily.
Pay Raises: Why It’s Important to Be Upfront About Pay
The most important thing is to communicate clearly your compensation policy to candidates and employees and then, more importantly, to explain to them exactly how they can be included in the total picture. When starting a new job, the majority of people want their new employer to provide the employees with their earnings, and this includes:
When an employee is hired, or after they’ve been there for long enough, providing them with the information they need will allow them to become more involved in their job instead of worrying about their salary. Particularly when it comes to promotions and raises, individuals would like to know they’ll be able to advance in your company and you intend to invest in their future.