Compensation Plan Design
A competitive compensation plan is a critical part of employee retention efforts. You need to ensure that the plan you offer is enough to attract quality job candidates and keep those employees with the company for the long term. A competitive compensation plan is a critical part of employee retention efforts. A compensation plan is a system of rewards and incentives for employees. It can be designed to motivate employees to improve their performance or productivity. A well-designed compensation plan will give the employee a sense of accomplishment and provide them with a feeling of worth.
You need to ensure that the plan you offer is enough to attract quality job candidates and keep those employees with the company for the long term. If your employees feel that they are essential to you and take care of them, they will do whatever you ask. Employees are, without a doubt, a company’s most expensive asset. Paying too much can be very costly. However, paying too little can result in turnover, low productivity and low employee morale.
The goal of a compensation plan is to align the interests of employees with the company’s short and long-term goals. A well-designed compensation plan can motivate employees to work harder and be more productive. The best way for a company to do this is by paying them in accordance with their contribution to the company. The design of a compensation plan should take into account various factors such as:
1) Employee’s level of experience
2) Employee’s performance
3) Company’s financial position
4) Company’s strategy
- Based on business strategy, we help align pay practices to drive desired behaviors and business results.
- We further help create the perception of internal and external fairness needed to attract and retain the right people.
- We help establish a pay system to set fair base pay and incentive amounts.
- Suggest salary range guidelines to set base amounts and control and manage labor costs.
- Implement procedures to set new-hire pay, promotions, equity adjustments, and pay increases.
- Review salary survey data comparison (survey data may cost extra). Incentive and bonus plan design.
- Alignment of other rewards and reinforcement practices.
- Identification of equity concerns and possible pay discrimination practices.
- Establish base pay guidelines that make sense, are competitive with the market, attract good people, and help control costs.
- Use the right kind of payment methods to drive desired results and behaviors.
- Create incentive and bonus pay plans that help drive business strategy.
- Promotion and pay increase guidelines.
- Evaluate, so you can change or grow as required.
- Be ready to make modifications to your compensation plan. Adjustments will be necessary for you to remain legally compliant and competitive.
According to Pay Scale’s 2022 Compensation Refocusing
Compensation’s Role in the Great Reevaluation
|Pay Equity||66%||of organizations say pay equity analysis is a planned initiative in 2022—a 20 percent increase over last year.|
|Remote Work||40%||of organizations are interested in using geographical differentials for location-based pay.|
|Remote Work||85%||of organizations agree or strongly agree that workplace flexibility is a key driver of employee engagement - 12 percent higher than compensation.|
|Pay Increases||88%||of organizations are worried about inflation but only 29 percent increased their budget.|
|Future Investment||75%||of organizations expect compensation will be more challenging in 2022 and 70 percent correspondingly plan to invest more in compensation management.|