Compensation management entails how companies view and manage employee benefits and pay. Companies tend to make up a compensation strategy that serves as a guideline on how to manage and articulate employee compensation on all fronts.
If your compensation management is noteworthy, you are likely to retain current employees, while also attracting new ones. There is a common misconception that compensation management is all about salaries. However, it also includes all of the employee benefits and any extra appreciation gifts/rewards.
The following compensation management tips are just parts of a larger compensation strategy. Not all companies will have the same strategy. This is why you should focus on the tips that may work best for your organization.
Develop Salary Brackets
You need to make sure that you develop your salary range according to the industry standards, in order to make your offers competitive (as per current demand) if not better. To do this, you need to benchmark similar jobs in the industry which will help you create an effective pay structure.
You can also develop salary brackets by checking out the pays for similar jobs online on websites such as PayScale. This also helps realize the differences in salaries and benefits across different areas and industries.
You can also pay third-party vendors to develop your salary payments, but if you have a big enough HR presence, you can do it in-house.
Allocation of Budgets
During your annual budget allocation, you need to set aside a good sum for compensation management. You should have a sum in mind (having gone through historical records) about how much money you need, to move forward. You should always try to increase that amount for the next year and develop a more comprehensive compensation budget, provided you have the resources for it.
Developing a budget that lets you spend on your employees’ pay and benefits freely will always mean good compensation management. As long as you’re fair with your compensations, you can be sure that your employees will be satisfied with that.
Proper allocation can be done more specifically, by distributing the compensation budget into different categories of salaries and benefits. For example, you can allocate different amounts to monthly salaries, overtime, and bonuses. Similarly, you can allocate different amounts to health benefits, PTO, tuition assistance, and 401K’s.
Develop a Flexible Benefits Package
Nowadays, instead of the salary, employee benefits are usually the number one factor people look towards (when evaluating a potential employer). This means that organizations can and do use attractive benefits packages to attract and retain employees.
Developing a flexible benefits package is all about offering choices to your employees. For example, if you are providing medical insurance, give your employees the choice of choosing where their insurance can be used. For example, if they want to spend more on dental, they should be able to do so.
You have to make sure that your benefits package is competitive and even better than others provided in the industry. There is a good chance that someone may choose you even if you’re offering a lower salary, but better benefits. Plus, if you offer to help people pay off student loans faster, it’s another plus point.
Use Performance Management Systems
Performance management systems are now a compensation management must. These systems track, record, and analyze employee performance over certain periods. They are then compared to not only historical records, but also current and future objectives and goals so that you can see whether the employee is performing up to the mark or not.
To use performance management systems properly, you will need to update your annual goals and objectives, develop performance appraisals, and a system for helping underperforming employees.
Compensation management is a tedious task, and unless you have a properly structured system to deal with it, you may experience redundancies, lag, and drag. This is why you need to assess and modify your annual review process, raise process timeline, and salary audits, to keep your administration up to date.
You also need to develop a process for each aspect of salaries and employee benefits. For example, you may need to update how you offer your benefits, like if you want to offer full medical insurance to all new employees or have a one-year minimum employment condition.
The Bottom Line
The following compensation management tips can be used to create a well-planned compensation strategy. Once you do that, there is a high possibility that your employees will be satisfied with the salaries and benefits they are receiving.
This then helps improve your employees’ personal finances, which can be one of the biggest motivators and the most effective retention technique. All in all, compensation management is one of the most important parts of your business process because your employees are the most important part of your organization. Therefore, it’s important to make sure they are satisfied.