You want to keep your employees happy, inviting their loyalty and encouraging them to keep up their hard work. You don’t want to replace them or have to fill recently vacated spots. Therefore, systematically, it’s a good idea to self-evaluate your compensation plan to ensure it is everything it should be and more in order to stay competitive in today’s market. Read on to learn five signs it might be time to seriously evaluate your current compensation plan:
1. Exiting Employees Are Citing Payment as Cause
Pay is becoming more and more competitive with today’s current labor shortage. Therefore, employees who believe they may be underpaid currently usually can find somewhere else to work that will pay them what they feel they are worth. If your employees are listing salary or other forms of compensation as a reason for their leaving, it might be time to consider your current compensation plan and make some changes.
2. Compensation is Becoming a Common Issue
While it is not that uncommon for an occasional employee to speak to you about their compensation, if you are having conversations about compensation at an increased rate, you might consider what is triggering that change. Are your employees perhaps discussing their pay internally (which is within their rights as a protected activity under the NLRA)? Are they job hunting and finding out they could be earning more, but desire to stay with you so that is prompting the conversations? Consider the fact that your employees are giving you a valuable chance to make the situation right by coming to you before they make their exit and take advantage of the heads-up!
3. You Have Issues With Pay Compression
Pay compression is when employees who have been with you a long time make the same as (or sometimes in today’s competitive market, less than) new hires coming in the door. This is often because the periodic pay raises which you have put into place are being outpaced by the market demand. This is a concern for several reasons and can create a heightened risk of turnover or poor employee engagement.
4. You Have Identified Pay Equity Issues Within Your Company
Pay equity relates to compensating employees the same when they perform the same or similar job duties while accounting for other factors, such as their job performance, experience level and tenure, regardless of their race, gender or other protected categories. While pay equity issues might happen accidentally, when identified, the issue must be addressed and a plan put into place to fix the problem. Other terms you might see used for pay equity issues include pay parity or pay disparity. Either way, whatever you label it is, noticing this going on in your place of business is a sign you need to take a close look at your current compensation plan and make some necessary changes.
5. It’s Been a Couple of Years
While it’s true that if you change compensation plans too frequently, altering commissions, incentives and the like, you can run into problems, if you don’t ever change it your plan can quickly become outdated. An annual look at your compensation plan is a good practice. Yearly, look at your current plan and then communicate to your team what is expected of them and how they can hit their goals. Tying this process to annual reviews is a good idea. That way you don’t forget and ensure you keep your compensation plan current yet not too fluid. It should be solid and understood but evolve at least yearly to meet market demand.
Having a good compensation plan is about more than money. Pay is not the be-all, end-all some employers think it to be. Instead, it’s important to look at your compensation plan holistically, considering not only employee pay but their engagement and happiness levels, their non-monetary benefits, their work-life balance and more. In other words, if the salary increases you are considering are just a band-aid for a bad situation, you need to do more than fix your compensation plan. You need to get to the source of the issue and fix the problem at its roots. However, if your employment issues are solely based on compensation, then by all means evaluate compensation. Contact us today to learn how to get started.