As stock markets begin to rebound, optimism around the US economy powering back is gaining momentum. That momentum means your company, assuming it’s not already, is likely to start opening.
While compensation may not be the focal point for most of your team as they get their bearings, rest assured that as conditions improve, employees will want to feel they’re being paid fairly, especially given that they may harbor ill will after having been furloughed, assuming your company took those steps.
Fair compensation can be a tricky concept to get just right but there are steps you can take to ensure what you’re offering is competitive and likely to keep your team intact for the foreseeable future. Here is some guidance on what those steps are.
1. Start With Labor Laws
When we talk about fair compensation, there’s a lot of subjectivity in that discussion. Where subjectivity stops and where our conversation begins is at labor laws.
Labor laws define in black and white what is considered fair per the locality you operate in. If you’re not in compliance with labor laws, you could be fined, sued, and will likely need to repay all withheld wages.
Talk to a business lawyer or an HR professional to get a beat on whether or not your business is operating in compliance with labor laws from a compensation standpoint. If you’re not, fix the holes in your policies before somebody’s lawyer fixes them for you.
2. Adopt Performance-Based Pay
Nothing makes people feel less valued than being paid less than teammates they routinely outwork. That may very well be the definition of unfairness in the compensation sphere.
If you agree with that sentiment, why then are you compensating people more for sticking around and less for their output? That equation should be flipped, where people that perform should be your top earners.
This approach incentivizes hard work which will help your company’s ability to be productive.
3. Know What Your Competition Is Paying
One of the primary reasons people leave one job to go to another is that they want to increase their earning potential. The good news is you can make doing that extremely hard for your employees by understanding what competition is offering and keeping in lockstep.
Switching jobs can create a lot of stress in a person’s life. That stress tends to be worth raises that are maybe 10%+ but do you think one of your team members is going to jump ship for an equally paying job or a 2%+ raise?
Chances are, the answer is no.
4. Be Transparent
There’s nothing stopping employees from sharing each other’s pay stub templates and figuring out how much people are getting paid. That information should come from you rather than from somebody else.
Your team should have a rough idea of what people are getting paid on your team based on output and experience. With that information available, team members can put together how best to proceed if they’d like to climb the earnings ladder.
This pay transparency is a practice you see with government employees like school teachers, who have pay scales published online in most districts.
5. Have Compensation Guidelines but Be Willing to Bend the Rules
When you share information with your employees regarding what one needs to do to get paid a certain amount, those principals should serve as guidelines for assessing employee compensation. That’s not to say, of course, that those guidelines can’t be bent.
If you have a particularly good employee that’s not satisfied with your compensation plan and is leaving, weigh the cost of losing that team member and have the flexibility to offer them more money if retention makes sense. Thinking outside of the box to put your team in the best position to succeed is always okay.
6. Audit Your Benefits
Compensation isn’t all about the dollar amount employees see on their checks. Benefits also weigh heavily into the compensation conversation.
For full-time workers, there’s an expectation in most circles that benefits include healthcare, fringe medical services (dental/vision), and retirement options. Other companies take this further by offering meal credits, discounts at local businesses, and more.
Work with an HR representative to put together a benefits package that pairs nicely with your monetary compensation offerings. Then, when you’re pitching employees on what you pay, be sure to state the value that your benefits add to what they’re receiving.
7. Take Surveys and Keep Improving
In a good economy, competition amongst employers can be fierce. That ferocity leads to compensation models constantly changing and an employee’s worth continuously growing.
To stay on top of your team’s sentiments towards what they’re being paid, take the time to ask them what’s going through their heads. This can be done via a survey that you might send out every month that gathers information.
Questions on your survey could include, “Do you feel you’re competitively compensated?”, “How important is compensation to you when it comes to this job?”, or “Are you likely to leave your position if you’re not compensated more soon?”
By asking the right questions and massaging your fair compensation policies, you’ll reduce turnover, boost productivity, and create a happier work atmosphere.
Providing Fair Compensation Is Less Costly Than You Think
When people throw around the term “fair compensation” there’s a sect of entrepreneurs that groan because it means ballooning payroll expenses and less money to invest in growth. The truth is though that compensation is a competition. If you’re not going to play, somebody else will and you’ll end up paying on the back end via turnover expenses.
Stay focused on the long game when it comes to payroll-related expenditures and keep reading the content on our blog if you’d like additional financial guidance.