(5-7 minute read)
For several years in a row, annual pay increases were below 3 percent on average. However, the Bureau of Labor Statistics reported that pay levels for nonfarm hourly increased by 3.2 percent in 2018. Salaries are predicted to eventually rise by 3.4 percent. All this is largely due to low unemployment and the resulting labor shortages.
But will increases such as these be enough for you to retain your best employees and attract qualified candidates? How can you offer great pay packages in such a competitive marketplace?
The current employment market has fueled a renewed interest in compensation methods and trends. The tight labor market comes with an all-time high rate of voluntary turnover. That means you need diligence and creativity to retain your existing staff and attract more talent. Here are some ideas to keep you competitive.
Your employees are essential to your day-to-day business operations, but there are some who hold strategic roles and would be more difficult to replace. As you review your compensation offerings, make the people in key positions your top priority. What is the competition paying for those types of jobs? What adjustments can you make to reward and retain those key people?
After you’re confident that you’re doing your best for your key employees, remember that any turnover is expensive. Work your way down from those positions and analyze whether your business is competitive enough to retain your general workforce. Consider the cost of replacing some of these employees should they decide to leave. Can that cost be averted by a pay raise or the implementation of a bonus program?
Raise your starting wages, if possible. Keep in mind that doing this might necessitate bringing your current employees up to a higher level—since a disparity in pay between seasoned employees and the new people will only cause job dissatisfaction.
Tie pay rates to performance metrics. Employees like to see a clear connection between what they do and the resulting success of the company. Make this plan concrete and clear to employees, and to keep employees motivated, consider implementing reviews for raises twice a year instead of just annually. According to research by Salary.com, pay-for-performance programs are used by 75 percent of organizations. As a result, these businesses are twice as likely to have employee engagement rated at above-average or excellent.
Establish a pay framework that’s manager-friendly. This will give managers the flexibility to reward above-and-beyond performance and deal with changing departmental needs. Just make sure they document performance so that pay equity can be proven if necessary.
There are many types of bonuses that you can add to your compensation plan. Some are more effective than others at helping employees feel engaged and appreciated.
Consider this list:
Studies show that individual bonuses and company-wide bonuses tend to rank the highest when it comes to driving employee engagement. Hiring and referral bonuses are among the most widely used, but they tend to score the lowest on driving engagement.
The above list of bonuses and incentives is only limited by your imagination. Can you design incentive plans for cross-training? The more an employee knows, the more valuable he or she is to the company. Try compiling and communicating a plan to increase pay incrementally for each new cross-training skill an employee learns and masters. Whatever compensation models you use to attract and retain talent, make sure the strategy is communicated clearly so employees are motivated to know how it works and how they can reap the benefits. Do your research, stay current, and make sure you’re competitive. That way, when recruiters reach out to your employees with new opportunities, they’ll respond with a firm, “No, thank you.”
March 28, 2019
Article Business Owners Under 50 Employees Competitive