For HR professionals and leaders in any field, developing a well-rounded compensation package is a top priority. Your compensation strategy heavily affects employee retention and engagement rates and should be created to support your business as it grows. However, it can be tricky finding the right balance between your budget and your employees’ needs.
Now, with a global pandemic converting many businesses to remote work and mass social movements highlighting diversity and inclusion issues, it’s more important than ever to look over your current compensation strategy to determine the gaps and areas for improvement. During a time when employee motivation and productivity might be interrupted by outside events, it’s crucial to have clear guidelines and programs in place that not only encourage employees, but also promote a healthy and attractive work environment.
Many businesses are likely struggling in light of these developments, and are unsure of how to approach their compensation strategy going forward. With limited budgets and other ongoing disruptions, a well-rounded and comprehensive compensation plan is more important than ever before.
It’s not uncommon that small businesses and nonprofits need some additional guidance to overcome their compensation challenges. We understand adapting to this new normal can be daunting. In order to help leaders like you develop a compensation plan that engages and retains employees, we’ve written the following guide. You’ll be exploring the following topics:
The importance of a well-rounded compensation plan
Revisiting your compensation package in times of change
Hiring a compensation consultant
Your employee compensation plan is important now (and always) because it shows your employees just how much you value their work and effort. Revisiting that plan is recommended to ensure your business is up-to-date with industry standards and effectively adapting to changes. Ready to learn more? Let’s begin.
1. The importance of a well-rounded compensation plan
As you already know, employee compensation is crucial for the success of your business and to lay the foundation for growth. The more well-rounded and sustainable your organization’s package is, the better you can attract, engage, and retain talent.
The best way to ensure your compensation package hits all the important points is to take a total rewards approach. Total rewards compensation accounts for all the ways your workforce is compensated, not just the direct forms, like payroll and bonuses. It also encompasses forms of indirect compensation, which oftentimes are the driving force behind an employee’s true happiness with your organization.
Approaching your own compensation plan with a total rewards strategy depends on your unique business goals and culture. How much goes into payroll versus the benefits you choose to offer depend on your employees’ exact needs, the nature of their work, and what your organization can afford.
To better understand what your current plan may be lacking, here the common components of a total rewards compensation package:
- Direct compensation, like salary and any bonus programs.
- Benefits, like health insurance, educational stipends, 401ks, and vacation days.
- Recognition of accomplishments and incentives.
- Corporate social responsibility programs.
- Programs to uphold diversity and inclusion initiatives as well as other equity issues.
- Company culture events and a focus on work-life balance.
- The quality of your performance management strategies.
As you can see, your employee compensation plan revolves around more than just how much each team member gets paid. Indirect compensation forms like health benefits and company-wide inclusion initiatives show your workforce that you’re prepared to support them for the long haul.
Because total rewards emcompasses all forms of compensation, these types of packages are better at reinforcing the full relationship between your business’s performance and your employees’ engagement. With both direct and indirect forms outlined, you provide a more dynamic and fulfilling experience for your entire team.
2. Revisiting your compensation package in times of change
It’s no secret that businesses and internal operations are shaken up. With many moving to remote work and corporations across the board redefining their diversity, equity, and inclusion guidelines, it’s worth it to look at your current compensation package and ensure it’s living up to expectations.
A well-rounded compensation plan should continue to meet your employees’ needs, even while they are working from home. This doesn’t mean just keeping up with payroll. If anything, taking a total rewards approach now is almost necessary in terms of strengthening your compensation strategy. If current events have got your business on a limited budget, those indirect forms are the best way you can reinforce your (virtual) company culture and show your gratitude to employees while everyone is in different places.
Further, your current compensation package cannot ignore diversity, equity, and inclusion issues. Recent events have made it clear that the need for change is very real, and businesses too should take a review of their current practices and determine areas for improvement. Diversity, equity, and inclusion can affect many of your compensation decisions, hiring practices, and internal culture.
Consider the following actions for your own business in terms of revising compensation:
- Educate yourself and employees on new legislation. In response to COVID-19, the United States government rolled out acts and programs to help businesses and employees who were negatively affected. From the Coronavirus Aid, Relief, and Economic Security (CARES) Act to the Families First Coronavirus Response Act (FFCRA), this new legislation impacts how you can both directly and indirectly compensate your employees. To better understand these impacts, read this article.
- Put a bigger focus on indirect compensation incentives. As a response to the current economic climate, your budget is likely even less flexible than usual. After all, many planned revenue opportunities are now obsolete due to social distancing guidelines. If your business has incentive-based compensation plans in place, it’s worth it to switch to an instant-rewards plan to immediately show employees their value for exemplary work. However, focus on non-cash prizes and indirect compensation incentives like gift cards or extra vacation days to use on a future date.
- Revisit current hiring practices. Not only does hiring look different with remote work, but many businesses are also making the point to look over their current recruiting and talent acquisition practices to reduce bias and ensure that the practices are in line with diversity, equity, and inclusion standards. If you want to attract potential hires, emphasizing any equal employment opportunity/affirmative action programs or other similar programs in place is good practice.
- Uphold pay equity standards. One of the common forms of work bias can take place within employee pay. It’s important that you look over your current direct compensation forms to ensure that they’re promoting diversity and equity for your entire workforce.
- Continue corporate social responsibility programs. With a limited budget, you might not think it’s worth it to continue your regular corporate social responsibility programming. However, according to this Double the Donation article, many companies are actually expanding these programs, especially for matching gifts. If anything, nonprofits need more relief now than ever before. Showing employees that you support the causes they care about also can help boost engagement and retention rates.
Taking the time to revise your current compensation packages is crucial for any businesses adapting to this new normal. Establishing these practices now will only help the long term health of your organization and keep your employees motivated during this confusing time.
3. Hiring a consultant
Oftentimes, business leaders think turning to outside help is a sign of weakness or a failure to their job. However, knowing when to ask for assistance and graciously accepting changes for the better is a top quality that all leaders should embody. If you’re unsure of how to approach your compensation plan, whether it’s due to recent events or just in general, advice from a professional might just be the thing you need.
For many businesses, a consultant is the best way to create a well-rounded compensation plan. When working closely with a team of professionals dedicated to helping your business, you can better cultivate an engaging and healthy work environment with a total rewards approach.
What exactly can a compensation consultant do for your business? Consider the following:
- Help flesh out overall compensation strategy
- Develop executive compensation strategy
- Conduct benchmark surveys to determine progress
- Review existing compensation plans to measure areas of weakness and opportunity
- Create or update incentive or variable compensation plans
Remember, your compensation consultant is working to help you. They should act as a partner to your organization and understand that compensation consists of more than just money for your staff members. This article on hiring a compensation consultant can give you further insight on how to best approach this process and find the right partner for you.
A well-rounded compensation package is extremely important, especially in times when work motivation and engagement levels might be low. In order to best adapt to these changes and set up the foundation for organizational growth, ensure you look over your current strategy and take the steps to fill in any gaps. If you need further help, don’t be afraid to turn to a professional compensation consultant!
Author: Jennifer C. Loftus, MBA, SPHR, PHRca, GPHR, SHRM-SCP, CCP, CBP, GRP
Jennifer C. Loftus is a Founding Partner of and National Director for Astron Solutions, a compensation consulting firm. Jennifer has 23 years of experience garnered at organizations including the Hay Group, Parsons Brinckerhoff, Eagle Electric Manufacturing Company, and Harcourt General.