You can’t just wing it and hope for the best when it comes to employee compensation. Your employees will inevitably talk about their pay with others, start doing their own research, or receive offers from other firms, and they will be furious if they discover you’ve been winging it with their pay instead of establishing a clear and fair compensation policy.
In fact, according to a PayScale survey, 25% of people stated increased income was the key reason they looked for work outside of their present organization.
What is fair compensation?
Fair means equal in elementary school. No one can complain because everyone gets the same thing in the same proportions. However, as with other things, when you move from kindergarten playgrounds to adult workplaces, fair becomes more complicated.
Fair compensation does not imply that everyone in the organization is compensated equally. Fair compensation, on the other hand, is the payment of an acceptable amount to employees based on their performance, experience, and job requirements.
You should develop an overall compensation plan for your business, but it should include provisions for paying people based on their contributions rather than making extensive choices about pay bases, raises, or bonuses.
Developing a fair compensation plan
A clear compensation plan can assist you in determining the optimal use for your compensation funds. In this blog, we’ll walk you through the 5 steps to creating a profitable and equitable compensation plan for your company.
Step 1: Gain executive support
As an HR professional, you’ll need to enlist the help of your executive team to develop or update your compensation plan. In general, this entails assisting executives in understanding that if employees are not paid fairly, they will look for work elsewhere. Every company should make it a priority to keep top employees motivated and pleased.
Step 2: Define your compensation strategy
This will mostly depend on how competitive you want your basic pay to be in comparison to the market value of a position, as well as how you plan to determine raises. Consider how your performance, skill, and job function will play a role in determining these.
Step 3: Create an industry-based approach to pay
You’ll need pay data from your market, which is comprised of other companies looking to hire people of the same sort and caliber, while accounting for your industry, firm size, and location. You can find reasonably priced services such as PayScale or Salary.com, which allow you to acquire benchmark data and build your own structure based on what they offer. You can figure out reasonable compensation for an employee using market data obtained from one of these services.
Step 4: Build pay ranges
Salary grades are a popular method of determining pay ranges. Each position in this model is allocated a pay grade based on the level of responsibility required to perform that role, the amount of authority a person in that capacity has, and the length of time that person has performed that duty.
Step 5: Put your plans into action
This will entail informing employees and training managers about your plan so that they can have effective compensation discussions with one another.
Communicating pay to employees
While you don’t have to be entirely honest about salary, you should let employees know what their pay structure is. It’s up to you how much information you share with employees, but telling them that you have a fair pay plan in place can help put their minds at ease.
Maintain consistency in your fair compensation and general communication. People will be able to understand where they are now and where they can go in the future as a result of this.