4 Things You Should Research When Reviewing Your Employee Compensation Plan
Posted on: 22 June 2016
Are you a business owner? Did you craft an employee compensation package when your company was in its start-up phase but haven't given it much though since then? If so, it's time to pull it out and give it a thorough review. But what should you look for to ensure you've got a plan that's fair to both you and your employees? Start with these 4 important components.
1. Industry Wage Reports
If you're paying way lower salaries than other employers in your industry and not offering any perks or bonuses to offset the difference, your highly skilled employees are going to take their talents elsewhere. You should be scrutinizing what similar companies are paying their employees in your industry and area and making your best effort to match those amounts.
There are companies that closely monitor industry salaries and send you reports for a small subscription fee, or you can look up your industry and region on the Bureau of Labor Statistics' webpage or on sites like glassdoor.com. Keep in mind, though, that the Bureau of Labor Statistics gets their data straight from companies, while glassdoor.com gets their information anonymously from employees. Hence, the Bureau of Labor Statistics' information will likely be more accurate than the data on glassdoor.com.
2. Federal And State Laws
If you think that all it takes to make your employee compensation package legal is to make sure all your employees earn at least minimum wage, you're wrong. The Department of Labor enforces 180 laws on a federal level, many of them related to employee compensation. And depending on what state your company is located in, it may impose several more.
Every single time you review your employee compensation plan, you should also be reviewing federal compensation laws and compensation laws in your state to make sure no new legislature has been passed that may affect the way in which you pay your employees.
3. Long-time Employee Retention Rates
Wage growth is high this year, partly because of an increase in demand of skilled workers. This means that replacing good employees is going to cost you more than keeping the skilled labor you already have. When reviewing your employee compensation plan, take a good look at the retention rate of your long-time employees. If many of the best members of your team have moved on to new jobs, it's likely because they see those new jobs as a better financial opportunity.
Don't let your competitors' promises of huge sign-on bonuses steal your help. With the hiring of new help being so expensive, it's time to boost your benefits package to reward your long-time employees if you find that many of them are leaving your company.
4. Employee Preferences
Finally, get to the heart of how satisfied your employees are with their employee compensation package by asking them yourself. Consider using a free poll generator such as surveymonkey.com or pollcode.com to gauge your workers' levels of satisfaction with topics such as base pay, performance bonuses, retirement contribution matches, and total compensation. This will give you a good idea of what is important to your employees so you can beef up those aspects of your compensation package.
For example, you may find that you're spending a lot of money on base pay by giving raises across the board when your employees would much rather you reward them with sales incentives. Knowing this information will allow you to focus your compensation program where it counts.
If you haven't reviewed your employee compensation program in a while, now's the time to do it. Start by scrutinizing the above four things and contact a compensation consulting firm like Fox Lawson & Associates, A Division of Gallagher Benefit Services Inc. if you need any help along the way.
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