Compensation can be defined as a reward earned by employees in return for their time, skills, effort, and knowledge. Compensation includes direct financial compensation, such as wages, bonus and commissions, indirect financial compensation such as health and welfare, retirement and leave benefits, and non-financial compensation such as job training and development, recognition, and advancement opportunities. A large percentage of the company budget is compensation, and therefore it is a key component of the overall strategic human resource management plan.
A compensation package can include more than salary and bonus. It can include health and welfare benefits, retirement plan, leave benefits, and various other benefits, and perks. Companies that offer a mix of salary and incentives have the highest employee morale and productivity. It is most effective to pay incentives as soon after goals are met as feasible such as monthly or quarterly incentive payments, rather than annual payments. A good incentive plan should be easily understood by the employees including no more than two to four performance factors. How you train, develop, and manage your employees will also drive retention and performance.
When developing your compensation program, the primary objectives to consider are:
- To attract the best people for the job
- Retain high performers and lower turnover
- Reward performance on specific objectives by compensating desired behaviors
- Motivate employees to perform their best
- Improve morale, job satisfaction, and company loyalty
- Align with overall company strategy, goals and philosophy
- Achieve internal and external equity
- Comply with all pay and non-discrimination regulations
While compensation is not the only thing that motivates people, compensation that is too low will demotivate employees. Studies have found a direct correlation between top performing companies and employees that are satisfied with their pay and benefits package. Competitive and appropriate pay can positively impact customer service. Employees receiving fair and competitive compensation packages are generally happier with their jobs and are more motivated to perform at their peak. Motivated employees can add to the bottom line of the organization and contribute to growth and expansion. Studies show that motivated employees take fewer sick days and have fewer disability claims.
While there are many objectives to a successful compensation program, two key objectives are ensuring internal equity and ensuring external competitiveness. Salary surveys provide the necessary market data to build competitive pay structures. Good salary survey data provides you with the information needed to ensure your compensation package is competitive. Salary surveys are an invaluable tool for the setting right compensation strategy and for following and monitoring the desired pay market. It is important that you select the right salary and benefits surveys and market data for your employees based on where you are competing for talent in your industry and outside your industry as well as geographic location.
WageWatch offers accurate, up-to-date benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes. Our experienced compensation consultants can assist with your organization’s compensation needs. We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online.