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Compensation Essay

953 words - 4 pages

Employee Compensation that Encourages Performance
By Kate Greene, SPHR
The strategy my neighborhood kids use to get customers for their lemonade stand is not unlike what many employers use to get employees. The kids scream “35 cents a glass” over and over, louder and louder. Would they have more success if they used signs, knocked on doors, yelled in a more even tone of voice, sold from a rolling wagon, etc.? Similarly, employers that advertise $8.00 an hour, over and over, may not get applicants or results they require. Better results come from compensation strategies that align company and employee performance goals. Establishing wages that will both attract employees and provide contain ...view middle of the document...

Without a system for determining raises and bonuses at every level, it is too easy to make decisions which break internal consistency. This opens a company to pay compression problems and possible lawsuits. 3. Align Pay With Company Goals At an individual or company level, compensation sends a very strong message regarding what results are important to the organization. If customer loyalty and profit margin are the key determinates to profitability, then these should be included in the bonus or commission structure. 4. Compensation Encourages Employees to Look at the Big Picture Individual incentives to perform communicate the importance of specific results. Rewarding for team or company wide goals widens the scope of what employee consider important. When meaningful, incentives tied to group results or profitability margins encourage loyalty, cooperation and get employees to look beyond just their function or department. 5. Stay Abreast of the Local Wage Market Understanding the compensation marketplace and creating fair total compensation packages is worthwhile to all employers. Doing so ensures minimized turnover and saves time and money when filling openings when they do occur. Additionally, keeping tabs on the market allows you to be proactive, adjusting to trends before facing competitive pay problems. Web

resources like or are available and provide one point of data. In considering survey data it is very important to consider the position descriptions, sample size, geographic area and methodology of calculating the wage levels. 6. Consider Total Compensation A common pitfall is the wide spread tendency to separate the elements of total compensation. This thinking leads may lead to employees coming forward with external data from and telling you “The survey says I should be paid more - I need a raise.” Beyond geographic differences, it is important to make certain that the salary data is comparing the same components that make up total compensation, which may include: Base pay – hourly, weekly, or monthly wage. Short term incentives – Often not...

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