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The standard way for calculating bonuses and compensation for a job well done has changed as the workforce has changed. Workers are now often requesting benefits from companies that they expect to add value to their lives. More importantly, workers are looking for employers that are rich in opportunity. In this environment, how do you create good compensation plans?
MLA has experience designing and implementing effective compensation plans for businesses of all sizes. We can help you establish performance-based criteria that are benchmarked against outside organizations. We can also present this to your leadership, employees, and other stakeholders to build consensus.
Smart employers know that keeping quality employees requires providing the right compensation and benefits package. Compensation includes wages, salaries, bonuses, and commission structures. Employers shouldn’t ignore the benefits portion of employee compensation and benefits, because the benefits sweeten employment contracts with the priorities that most employees need.
When owners or compensation teams think about a compensation plan, they generally think about creating pay grades (or grade-based salary ranges). Historically, this has been a good approach as administrative capacity and market data were limited. However, thanks to recent technological advances, HR administration has become streamlined, and more competing salary information is available.
In the past few years, organizations of all sizes have moved away from a grade-based structure towards a market-based model where each job is priced according to its value in the market. At a time when concerns about hiring and retention are high, business leaders have come to realize that a good compensation plan needs to be responsive, flexible, and transparent.
The workplace is changing, but compensation plans have often fallen behind. Employees want incentives more than compensation. The growing workforce is much more invested in motivation through other means like bonus plans that reward your hardest workers and adjust to flexible work hours.
Satisfied employees are not solely motivated by money. As employees grow beyond traditional compensation, incentives are the next step. They promote a higher level of productivity in employees and deepen company culture. Employers have to discover flexible compensation plans that use incentives that are best for their company.
Short-term incentives reward drive, productivity, and behaviors that have an impact on the company’s bottom line. Incentives also encourage teamwork and collaboration by weakening silos in addition to rewarding success.
In order for short-term incentive plans to be effective, rewards must:
People who are worth a specific salary amount often know their value and will seek a position that pays accordingly. That’s why you should do research on what your competitor’s compensation and benefits packages look like. Make sure you offer a similar package to your potential employees so that you attract the best candidates for your company. Hiring the right candidate the first time reduces recruiting costs and helps free up business owners for other tasks.
Properly compensating employees shows you value them as workers and as human beings. When people feel valued, they feel better about the work they do. Overall company morale increases and people are motivated to do a good job. Additionally, bonuses or commissions provide increased motivation.
Proper compensation is one factor why employees remain with employers. Loyalty means that business owners don’t need to continue to spend time, money, and energy on recruiting new candidates. Employee retention and low-turnover rates are great for employers who cultivate a team that knows what to do. That team is also motivated to be part of the team, and they get the job done well.
Creating the right compensation plan leads to stronger job satisfaction. A good compensation plan includes benefits, along with all the other bonuses available. The right compensation program invests employees into the work being done, which gives them a stronger sense of satisfaction when the company succeeds.
Do you have questions about how your compensation plan can work harder for you? Talk to an MLA Advisor today.