Plan for RewardsĪs you make your budget, consider how you can use total compensation as a way to engage employees, increase performance, and entice them to stay. Include plans for performance or merit increases that will take place as part of annual reviews. Factor in all costs, including taxes, payroll costs, existing benefits, compensation, and bonuses. Identify the total amount you can spend on any one employee. Take a realistic look at your company’s human resource and operational budgets. Allocate BudgetĬompensation planning doesn’t occur in a vacuum. And, you may be able to get creative about other, lower-cost options you can include in your total compensation package. You may not be able to match them item for item, but with this information you’ll be able to address gaps during interviews. To remain competitive in your industry and the locations where you conduct operations, take time to benchmark what your competitors offer their employees. Benchmark against CompetitorsĪs mentioned above, your compensation plan and employee benefits are a way to attract talent. By asking for input, you can create an informed strategic compensation approach that fits with your talent management strategy and will satisfy most employees. Younger employees may be interested in a daycare subsidy, while older employees might be more focused on retirement plans. Find out what benefits matter most to your workforce. Of course, employees aren’t going to be part of the team that determines salaries however, you can ask for their input about total compensation. Here’s what you need to consider when creating your strategy: 1. In June 2019, the Bureau of Labor Statistics reported that “costs for employee compensation averaged $36.61 per hour worked.” Wages and salaries accounted for 68.6 percent of these costs, and benefits were 31.4 percent. It’s essential to have a strategic compensation approach, as the costs are a significant expense for businesses. Steps to Create a Strategic Compensation Strategy When done well, strategic compensation becomes a way of building trust in the workplace. To reap the benefits of a strategic compensation strategy, it’s essential that companies proactively communicate total compensation to their workforce. Organizations that have a strategic approach to compensation should use it to not only manage employee pay and benefits, but also to attract and retain talent. “Executives will need to factor in these employee expectations to remain competitive and to attract and retain talent otherwise, they risk losing their best workers to competitors.” industries in 2018, employees hold much higher expectations for greater increases in wages and bonuses going into 2019,” a vice president from Gartner told the Society for Human Resource Management (SHRM). “Given strong economic performance across many U.S. Employees seek employers that not only pay them a competitive wage, but also provide benefits and programs which help them address other financial costs, such as healthcare and retirement plans. In the past, compensation may have been just a paycheck, but today it’s much more. A strategic compensation strategy guides an organization’s approach to managing total employee compensation.
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