Recommendation on Compensation Strategy
1. Budget Allocation
The strategy should include the organization’s approach to
allocating compensation budget into salary and benefits. This strategy will
determine how much of the total compensation budget will be spent on salary and
what percentage will be spent on benefits and other incentives.
For example, for a budget of $1000 for compensation, if 90%
is salary and 10% is benefits, determine how that 10% is spent – one scenario
might be – 7% on health benefits, 2% on retirement savings and 1% on tuition
reimbursement.
Allocating specific budget to pay and benefits can help
control labour, health care and other miscellaneous benefit costs.
2. Salary Audits
Markets change therefore it is important to perform routine
salary audits to ensure salary ranges reflect current compensation trends in a
particular industry.
When performing an audit, the goal is to determine how
competitive are those particular jobs and what is the external market
demanding.
Ask the question, is it a growing or dying profession?
It is important to pay attention to market changes and to
stay current because failing to keep up with the competition can lead to loss of talent
and valuable employees.
3. Benefit Package
Many organizations use benefit packages, in addition
to salary, to attract and retain employees.
Their goal is to be competitive with health, retirement,
tuition reimbursement and other benefits because they understand that it can be
the determining factor for a job candidate who is deciding whether to accept a
position with an organization, or an employee who is considering leaving.
4. Performance Management System
It is important to have a structured performance management process to ensure employees are
meeting corporate objectives and are assessed on a regular basis.
This process should include development of annual goals,
annual performance appraisals and a structured process for coaching and mentoring employees.
Compensation strategies can positively influence employee
engagement and improve employee productivity.
5. Legal Compliance
A well defined compensation strategy will incorporate legal
requirements to ensure the organization is in compliance with all federal and
state laws.
The goal is to eliminate natural biases made in hiring
decisions and ensure compliance with Employment Act 1955 and etc.
6. Structured Administration
As with any other business process, structure is
important. Developing an annual review process, salary audit, raise
process timeline and making sure someone is responsible to ensure all
areas are completed is critical to successful compensation management.
Finally, a comprehensive compensation strategy can be the
foundation for creating an environment that recognizes and rewards employee
performance and helps to establish a strong culture of employee engagement.
Organizations are only as successful as their approach to
hiring the right people, setting clear expectations, managing performance and
recognizing and rewarding employees for a job well done.
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