According to Glassdoor, the top consideration when a candidate evaluates a job offer is salary and compensation. That’s not surprising. Although career growth opportunities, work/life balance, location, and company culture are also important, it’s the compensation package that tips the scales.
Compensation is more than just salary - it includes bonuses, incentives and commissions, stock options and indirect compensation like health and life insurance, worker’s compensation, and 401K matching. Developing the right mix of components is central to attracting, and keeping, the best employees.
But establishing an effective compensation strategy is not just a one-person job. It requires the input of a cross section of disciplines including: managers, IT personnel, HR staff, and most importantly, an executive sponsor to champion the plan. Along with this team, you also need a compensation technology partner that understands your goals and can help you to implement those goals with the most appropriate HR software solution for your organization.
By taking this team approach, you can help improve your chances for success by:
1. Ensuring market level rates
Competition for talent is fierce, so your total compensation packages must equal your competitors. Having market level rates is important not only when hiring new talent, but to retain the high performers already on board. If your best people are “window shopping” for a better deal, you want them to discover that your compensation plans are as good as anything they might find elsewhere.
2. Mitigating risks
Demands facing HR departments grow by the day. FLSA, EEO, and pay equity requirements are just the tip of the iceberg. You must also report on the new CEO pay ratio disclosure and other government mandates. In addition, you may be facing increasing requirements and reporting requests from your board or other senior executives as they become more concerned with the negative impact of non-compliance with labor laws and regulations. As the demand for reporting and analytics capabilities increase, it’s important to have a functional compensation team in place to stay ahead of these requests.
3. Maintaining close collaboration with finance
At most organizations, compensation is one of the largest line items on the P&L, so your finance team needs to be intimately involved in compensation discussions. Having a compensation team established - including a finance representative - creates a forum for an ongoing relationship with finance, further enabling you to work together on cost control initiatives. Your compensation should be tied to target metrics and budget, and this means working closely with finance to track goals to actual spending.
Most importantly, for this cross-functional compensation team to be successful you need action – put periodic and ongoing meetings on the calendar and make sure to carry them out. Once this team has developed a regular cadence, you’ll see that all your compensation strategies – from continuous rewards to drive performance, development of streamlined planning and flexible workflows, and enforcing complex compensation rules to meet compliance standards – will reap the rewards.