The “Great Resignation” pressed many firms into a reactive posture toward compensation. The threat of losing essential employees caused some employers to scramble and perhaps make uneconomic one-off compensation decisions. It may be time for a fresh approach to compensation planning.
Compensation decisions should ideally be based upon a clear overarching Compensation Philosophy that balances company prosperity, economic realities, and employee needs. The philosophy statement outlines how and why the organization plans to pay and reward employees. Insperity’s approach centers on our company values and demonstrates commitment to our people. It clearly lays out our objective and non-discriminatory compensation approach which we make accessible to all in the employee handbook. The Strategic Compensation Plan should be built using the compensation philosophy and is a critical part of overall human capital strategy.
Our strategic compensation plan begins with a base pay methodology built upon principles of objectivity, internal equity, and consistency. It classifies positions into job grades by comparing a standard set of variables like decision making authority, problem solving, customer impact, and skills and knowledge requirements. We then establish and benchmark salary classifications against market surveys to verify competitive levels. Other position-appropriate compensation tools like sales or incentive compensation are also used. Long term compensation tools such as equity awards and profit sharing can build long-term ownership commitment.
Employee benefits play a powerful role in attracting and retaining employees. They provide employees and their loved ones financial and health security beyond the paycheck. The greatest employee impact, results from carefully considered benefits that employees value. Insperity provides benefit plans equivalent to the packages offered by large corporations making smaller firms more attractive.
A low-cost yet powerful tool which satisfies a very deep human emotional need is a formal recognition and appreciation program. Tied to company mission and values, recognition reinforces employee innovation, customer attention and discretionary effort. Ways to recognize employees is unlimited – formal awards given at large gatherings, daily supervisor praise, thank you notes from leadership to name a few. The skill of expressing appreciation and recognition should be a vital part of leadership training.
Compensation decisions can be complicated and frustrating. Taking control by creating a standing compensation philosophy and comprehensive strategy will eliminate repetitive decisions, improve employee satisfaction, and ensure compliance.
For more details on building a high-performance compensation system, get the book: Paul Sarvadi, (2019) Take Care of Your People, The Enlightened CEO’s Guide to Business Success, ForbesBooks.