Is Your Compensation Plan Paying Off?

Every business should regularly revisit its compensation plan to ensure it evolves over time. Not only will your workforce change as your business grows, but the job market itself is always shifting, which impacts your employee’s expectations.

Overall, the biggest measure of your compensation plan’s success is whether your business has managed to find and retain top talent while keeping compensation costs an affordable part of your operating budget. If you haven’t already, it’s time to take a serious look at your compensation plan and consider what changes should be made.

Reviewing Your Compensation Structure

The current market should significantly inform whether your plan meets market needs. Some highlights of the current market include:

  • In September 2017, wages and salaries accounted for 3 percent of civilian employee compensation, with benefits making up 31.7 percent.
  • Paid leave represented 7 percent of employee compensation, respectively followed by supplemental pay, life and health insurance, and retirement benefits.
  • Compensation and benefits can vary by occupational group, as well as by type of employer.

As you review your compensation plan, you’ll need to research the going market rate for each type of position in your organization. Although statistics from Payscale and the Bureau of Labor Statistics are useful for finding average salaries, you’ll have to dig deeper for more meaningful data. Whether the information you uncover merits a raise for employees or not, having it handy will help you make better decisions moving forward.

Along with looking at your pay rates, you’ll need to ascertain whether your benefits are in line with industry averages. For example, are the benefits you provide in a range close to 31.7 percent of what you’re paying each worker?

One of the biggest indicators of the adequacy of your pay structure is how it compares to your direct competitors. Pay close attention to job ads posted for positions similar to those at your company. If other businesses could lure your workers away with higher salaries, better medical insurance, or other perks, it may be time to make some changes.

Meeting Your Business Goals

Your compensation plan should not only satisfy industry standards but also meet your business goals. As you review the plan, ponder these questions:

  • Does your compensation philosophy support your overall business strategy?
  • Does your current team fit your business’ culture?
  • Do you find that you’re losing out on great candidates due to the salaries/wages or benefits that you offer?
  • Is your turnover rate high?
  • Do your employees seem happy?
  • Are employees occasionally asking for raises or expressing dissatisfaction with your benefits package?

Your business’ employees are its most valuable asset. Whether you have one worker or over 100, maintaining high worker morale is pivotal to achieving successful business outcomes. If budget constraints make it difficult for you to provide big perks, keep in mind that your employees may be just as appreciative of small gestures, such as flexible work hours and notes congratulating them on their work performance.

Keeping It Compliant

Is your compensation plan in compliance with employment laws? From one year to the next, you could find that the plan becomes outdated simply because of changing laws that you failed to implement, putting your business at risk. There are several regulations that affect pay and benefits—including the Equal Employment Opportunity Commission’s discrimination laws—so be sure to review the plan for compliance.

Considering the complexity of evaluating a compensation plan, you may be better off partnering with an HR solutions company that can look over your plan and tell you whether it’s competitive—and what needs to be done if it’s not. Contact us today to find out how we can help!

 

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Date

February 8, 2018

Author

AXIOS HR

Category

Article Blog Entries Care