While it certainly takes more than money alone to attract and retain skilled professionals, it's helpful to offer competitive compensation packages. Employees who feel they're underpaid will also feel they're undervalued and are more open to potential offers from outside firms.
To aid in their retention and recruitment efforts, businesses of all sizes are paying close attention to employee compensation. Following are five elements found in many compensation packages.
Base pay, the foundation of most packages, is the fixed portion of salary employees receives for performing standard job duties. Companies must develop a strategy for the progression of base pay. This is most frequently accomplished through regular annual increases based on a performance review process.
Performance-based pay is popular with firms interested in recognizing exceptional performance without raising fixed costs. In addition to this advantage, performance-based rewards tie compensation to the achievement of corporate goals and can be a strong motivational tool.
Equity-based compensation is designed to retain staff over the long term and has gained in popularity as a recruiting tool with the increased use of stock options. Firms wishing to remain competitive are accelerating stock vesting schedules, offering employees more control of their assets and quicker access to profits.
Benefits packages are becoming more progressive. With increased emphasis on employee choice and work-life balance, new programs such as pooled vacation and sick time, employee concierge services and financial planning are being offered.
Reward and recognition programs including bonuses, extra time off and professional development opportunities are key factors in defining a firm's corporate culture. These incentives are excellent tools for rewarding specific behaviors or actions, such as employee referrals, overtime and team contributions. Awards don't have to be costly to be effective. Recognizing employees in front of their peers or within a company newsletter, for example, can have a lasting, positive impact.
Following are four guidelines that can help you build an effective compensation package:
Compensation has a significant effect on how employees feel about their jobs, so be sure to periodically re-evaluate the packages your firm offers and how well they keep pace with the market. Offering fair and competitive compensation will help you reduce turnover and the costs associated with it.
"Awards don't have to be costly to be effective. Recognizing employees in front of their peers or within a company newsletter, for example, can have a lasting, positive impact."