Strategies for Effective Compensation Management
70% of organizations say they either have a strategy for compensation or they are working on one. This says a lot about compensation management practices in Canada and around the world—mainly that it is crucial to have a good strategy in place for compensating your employees.
What is Compensation Management?
Compensation management includes the policies, practices, and strategies used to offer your employees the best compensation for their hard work. This ensures that you are compensating your employees in the most competitive and equitable way. The different types of compensation can include things like salary, commissions, overtime pay, bonuses, stock options, benefits, and more.
Why is Good Compensation Management Important?
Having a competitive compensation package means you can recruit and retain better workers, increase workplace morale or satisfaction, reward peak performance, reduce turnover, and encourage company loyalty. The importance of employee retention—and how it can save your company millions in the long run—is not to be understated. Not only can compensation management impact employee retention, but it also plays a large role in the hiring process, company performance, team engagement, and company success. If employees can find better compensation elsewhere, performance and job satisfaction could decrease, signaling negative effects for your business.
Luckily, statistics show that sometimes it does not take a lot to increase employees’ job satisfaction. In fact, 80% of employees would prefer new or additional benefits over a pay increase. This is because employees prefer freedom and autonomy. Being able to work a few days a week or have flexible hours can add more value to your employees’ lives than a simple pay increase. Research shows that many employees appreciate a good work-life balance, which can be achieved at little to no cost.
In addition to increasing employee satisfaction, good compensation can help with workplace productivity. For example, if you are allocating compensation in the right areas, you can get maximum returns from your employees and their quality of work. This is why it’s important to provide the right compensation—compensation strategies that worked for a small business just starting out will not work for a growing business that needs to maximize its employee productivity.
You can leverage this information by incorporating some best practices in your compensation management. You’ll want to stand out from competitors by offering a competitive compensation package to draw talented workers to your company, or you’ll risk losing good employees to competing businesses. As mentioned earlier, after hiring a new employee, good compensation can increase employee retention, meaning the new hire would be incentivized to stay with your company longer. This will decrease employee turnover, which is oftentimes costly.
Using compensation to reward exceptional job performance can increase workplace morale and leave employees feeling appreciated. This encourages the employee to continue being productive and stay with your company rather than seeking better-paying jobs elsewhere. Remember, compensation does not always have to be a salary increase or a bonus—you can include stock options or other benefits as well.
Other Considerations for Compensation Management
Not all employees are the same—sometimes it is wise to change up your compensation strategy depending on who your employees are. For example, 33% of companies report changing compensation strategies to accommodate millennials employees.
Remember to get to know your employees and their values by surveying them. Although statistics show general trends around the world, there may sometimes be exceptions. In fact, 32% of top-performing companies say they have changed their compensation as a result of employee engagement survey feedback.
Keep Up to Date
A good compensation management system accounts for current market trends, which can again reduce turnover and increase workplace satisfaction. In addition to trends in the market, you’ll want to keep up to date with law changes as well as workforce trends. An example of a workforce trend is wellness incentive programs. Many companies are incorporating these programs and investing in their employees’ health and wellness. This can be done by offering gym memberships or encouraging employees to bike to work. A wellness program can also include doing group retreats and activities that promote healthy living while strengthening workplace connections and improving workplace culture.
Be Flexible and Receptive
Remember that employee values can change as the times change. Keeping up to date with broader worldwide trends can be beneficial, but remember to account for the changing dynamic in the workplace too. Not only can surveys help analyze these changes, but you can also have check-in meetings with employees to gain a better sense of what their needs are. This can lead to tailored benefits, such as longer parental leave. Knowing and being receptive to your employees’ wants and needs can lead to a better, more productive workplace.
Be Transparent and Communicate Effectively
70% of workers believe transparency is good for employee satisfaction. For example, increasing pay transparency can improve employee satisfaction, engagement, and retention, as well as close the gender wage gap. According to numerous studies, greater gender diversity results in greater productivity, innovation, better decision-making, and increased employee retention and satisfaction.
Being clear about compensation also eliminates rumours and false assumptions, and can lead to greater trust in your company. One way to be transparent about compensation is to give employees access to the formal policy around your compensation program. One study showed that employees at larger organizations are twice as likely to believe they are paid unfairly. This effect can be mitigated by being more transparent with compensation processes as well as gathering employee feedback.
Work With Software and HR Professionals
Software to help with compensation management and employee data can help HR professionals streamline compensation strategies and implement better policies. Good software can also keep managers, supervisors, and CEOs in the loop and give HR representatives the chance to explain the reasoning behind specific policies. In addition, it can help with budgeting for employee salaries, providing salary information for a specific role, and centralizing employee data for employee-related decisions.
Having a good software system can also ensure you are keeping updated on current laws, corporate policies, and other regulations. It can make things a lot simpler and easier for HR professionals, managers, and employees.
Emphasize Corporate Values
Your business’ values act as guiding principles for how you run your business—from the hiring process to deciding compensation strategies. Your values should be showcased and emphasized in all processes, including compensation management. For example, if education is a core value at your company, then offering educational benefits could be a relevant way to compensate employees. This could include giving employees discounts on educational or training programs, or subsidizing employees’ tuition fees for graduate school. This requires that you review the policies surrounding compensation to ensure it is aligned with your company’s values.
Let Us Help
In addition to providing best practices for compensation management, Imagine Better Solutions also helps with corporate governance and employee retention. As a company that strives to be a one-stop shop for ease of management, we have all of your HR needs covered.
Feel free to contact us for more information at https://www.imaginebettersolutions.com/.