Employees are the lifeblood of any business. Imagine what could happen if you lost your employees today, as they chose to leave your organization for greener pastures. A domino effect of negative situations may take place.
First, the operations can become severely disabled, reducing or lowering efficiency and productivity. Customer service then becomes poorer, and, without a doubt, the profit-earning capacity of your business may be affected as well.
Those are only a few of the many compelling reasons why it’s a good idea to take good care of your employees. They have to be properly compensated, way above the minimum wage if they’re entitled to, for the position they hold.
And for them to be compensated properly, your company would need an employee compensation strategy. In a nutshell, an employee compensation strategy is a plan that discusses how much and what every employee is entitled to, in exchange for their services.
And for that, here are five practices your business can apply, as recommended by NYC workers’ comp lawyers, for you to start developing an effective employee compensation strategy.
Pay Employees Their Salary, Plus Incentives
A basic starting point is never to pay employees any less than they deserve to receive. Local labor laws of your state or nation dictate the minimum wage they’re entitled to, and it’s for you to at least follow that. Depending on your business’s current financial state, that’s when you can slowly increase your offers to give more incentives to employees who deserve such.
Don’t be stingy. It may mean a higher expense for your business, labor-wise, but the returns can be significantly higher. So long as you keep your employees happy and motivated to do their job. Here’s a brief guide to understanding how salaries and incentives are different from each other:
- Salaries are offered to employees as compensation for performing the tasks they’re required to do;
- Incentives, on the other hand, can be likened to commissions, which motivate employees to meet and exceed their goals, so they can have an opportunity to increase their earnings.
Offer A Generous Budget Allocation
When the time comes for your business to discuss your finances and budget allocation, make it a point to be as generous as possible. If your budget allocation is too slim and narrow, it would be harder for you to provide competitive employee compensation packages. So, it would be best to allot as much as you can for the good of your employees and business.
Once you’ve determined your annual payroll budget allocation, you can then proceed to determine how much of that amount will be allocated for the salaries and how much would be for the other incentives.
Making it a part of your financial discussion ensures that your business can have enough money left for employee compensation packages even at the end of the year.
Complete The Key Components Of Employee Compensation
A good employee compensation strategy has the following four key components:
- Base pay – covers the employees’ basic or hourly wage for the job they’re required to do. It is also the fixed amount that both the employee and the employer have agreed upon during hiring. The base pay is determined to make it equivalent to the employees’ skills concerning the position they hold.
- Incentive pay – refers to additional monetary pay on top of the base pay to encourage better performance. Incentives can be given through commissions, stock options, bonus payments, and overtime pay.
- Employee benefits – these are non-salary or non-monetary benefits employees receive, such as coverage for health insurance, a phone allowance, dental insurance, a company car, and retirement contributions. Therefore, comparing healthcare benefits is essential when designing an effective employee compensation strategy
- Time off – covers the pay employees can still receive even when they’re not at work. It can include maternal and paternal leave, paid time off, and vacation and sick leave.
Keep The Criteria Specific And Measurable
Do refrain from making your employee compensation strategies over-complicated and difficult to compute or understand. The simpler it is, the better.
In fact, it should be explained and discussed in clear and comprehensible language for everyone in your organization to understand. The whole premise should be that disputes over employee compensation must be reduced to the point where there’s not much question surrounding it.
Remember the acronym SMART. It should be specific, measurable, ambitious, realistic, and time-bound.
Develop Salary Ranges
Salary ranges are needed for you to have for the proper determination of employee salaries. Typically, the scale would depend on the skills and the job performed along with the position held by the employee.
Having salary ranges is another good way to motivate employees to do better consistently. With this, employees can have a goal to work hard to aim for a higher position or promotion.
When this kind of competitive culture is present in your business, the result is a win-win. Employees are happy with good pay, and your business is satisfied with the results of their top-notch performance.
With the practices above, you can finally be closer to making no mistakes when compensating your employees properly. Remember that employees today want and need more than just their basic paycheck.
They need to have benefits and other perks that allow them to have satisfaction in your company. Essentially, offering a good compensation package is the key to motivating employees to be productive and stay in your business.