Compensation plans go beyond what an employee gets paid. After all, while a high salary might get talent in the door, retaining that talent can take vastly different efforts.
To attract and retain the highest caliber of talent, the best companies engage in compensation management, which takes a holistic approach to compensation packages.
How Compensation Plans and Compensation Management Intersect
Attracting key talent requires doing a fair amount of market research to ensure your financial package is in line with the market. You also want to make sure that your company's benefits aren't creating reasons for a candidate to say no.
Yet once your dream hires are inside the door, you have to do the work to make sure they're not looking elsewhere.
The best compensation management plans benefit both the company and its employees through policies that make all team members feel appreciated and respected—from how much they earn to the free time they have to spend it.
HR professionals create compensation plans that make all employees feel like they're receiving competitive and equitable wages and benefits, which ultimately leads to higher talent retention.
Thoughtful compensation management takes into account every aspect of a company's compensation packages, from recruiting to retention. This includes:
Salary and bonus structure
Market research in your industry ensures that you're offering appropriate, competitive and equitable (ACE) financial compensation and building bonus structures that are widely understood.
- For recruiting talent: When talent sees a company offering fair compensation and bonus structures that reward performance and loyalty, candidates can see both a present and future with that company.
- For retaining talent: Building compensation plans that are financially competitive and equitable means your key talent will have fewer reason to look elsewhere for salary bumps. (Especially if you're transparent about ways they can achieve bonuses.) They'll know that they're being compensated fairly and according to policies applied equitably throughout the company.
According to a 2019 Hubspot study, different generations of workers value different benefits. (The study surveyed 19,000 participants from 61 different organizations.)
Benefits aren't a one-size-fits-all solution. Company leaders should invest in flexible options that speak to multiple life stages and talent ages.
- For recruiting talent: Companies that offer flexible benefits packages could be viewed as more appealing by top talent. For example, in Hubspot's survey, employee retirement plans didn't rank in the top 10 priorities for any generation, yet working hours, leave and insurance were all top-rated priorities.
- For retaining talent: Tailored benefits packages can lead to appreciable employee satisfaction results. In the Hubspot survey, employees of a noted spirits company were over 31 percent more satisfied with their benefits than other companies surveyed. The company offers highly flexible compensation packages and benefits that each employee can personalize.
The best compensation plans consider every aspect of the ever-present, "Why choose us?" question employers must answer for prospective hires and those already on the payroll.
Gone are the days where employees choose a 20-year career home for the pension. Instead, companies today have to continue encouraging employees to stay on their
teams through many different avenues beyond job duties and company prestige.
Designing and Implementing Thoughtful Compensation Plans
The good news is that your company can use compensation management as a tool to build a system that makes employees feel seen, appreciated and valued from day one.
The steps below can help your team get a smart start on designing compensation plans that go beyond "here's what we offer" and expand into "here's how much we value our team."
1. Create a roundtable with HR, management and leadership.
Successful compensation plans have buy-in and ownership at every level of the company and must be driven by leadership.
By bringing all these participants to the table, you can create a space for leadership's vision to align with HR's market research and proposals. From there, you can craft a compensation ethos that managers can champion and carry out day-to-day with their teams.
2. Seek employee feedback.
As you build out your compensation plans, invite your current team members into the conversation with surveys.
If you're looking for some sample questions to inspire your own survey, a web search can help you find happiness index questions. A web search can also help you locate sample employee compensation and happiness surveys for inspiration. You can reverse-engineer your own questions from there.
Once you have responses, your roundtable team can discuss the results and create a plan.
3. Make understanding an imperative.
Fancy benefits booklets and PDFs might put compensation plans out there, but they don't necessarily foster understanding.
Review your company's onboarding process and carve out space for HR to educate employees on every aspect of your benefits and compensation structure.
In doing so, you'll also create space for employees to ask questions and better understand all the benefits available from the company.
4. Measure the impact of your compensation plans.
Compensation plans have multiple moving parts. And those parts will need to change over time to adapt to social norms, economic cycles and competitive pressure.
Be sure to build in at least an annual review of your compensation packages so your company and employees aren't left behind by those able to adapt their compensation plans quickly. Measurement can include an annual employee happiness survey, market research by HR and manager feedback on team motivation.
Compensation packages might not seem like rocket science, but in today's competitive economy, they're approaching such levels. The best compensation management plans benefit both the company and its employees through policies that make all team members feel appreciated and respected—from how much they earn to the free time they have to spend it.
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