Develop Effective Employee Compensation Plans

Posted by Judy Fort on March 8, 2016

Finance

Offer the right salary and benefits to your workforce

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Part of being able to hire and retain the right people for your organization depends on the salary and benefits you can offer - are they attractive enough to get someone to join the company and to stay with you if another company makes them a reasonable offer?

Let's start with salary. According to a Gallup poll, one of the two key factors in a job-hopping employee making the move to another company is that it significantly increases their income. This knowledge makes it important for companies to not only make salary structures that are attractive at the start, but stay attractive to keep your best employees with the company. There are many things to take into consideration, but as this article from Entrepreneur explains, flexibility doesn't hurt. Use salary market data to get a good baseline for the position, then decide if you will offer additional compensation in the form of commission, bonuses, or direct revenue incentives.

Another survey gives us some additional food for thought when it comes to salaries. When presented with the statements below, respondents agreed that these items would have an impact on how they viewed their salary. 

  • An increase in salary is my top reason for changing jobs.
  • Knowing that my co-worker has a higher salary would impact my decision to leave an employer.
  • Not receiving a salary increase as a part of my yearly review would make me consider changing jobs.

However, salary is not the only factor when it comes to the total compensation package for an employee. The benefits that are available to an employee are also a part of that bigger picture - different employees may have different values placed on these benefits. For example, Baby Boomers ranked health insurance as the most important benefits offering, Generation X ranked vacation and sick time at the top, and Millennials ranked professional development as highest. Knowing your workforce and how the expectations may differ can help make sure you are presenting the best possible benefits package to attract and retain talent. Overall, the results of an informal survey yield this ranking of the importance of different benefits to employees (from least to most important).

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