Five Compensation Trends Impacting Your Business
While compensation
planning has traditionally been approached as an annual process within
companies, large, midsized, and small, there has become a heightened focus on
approaching compensation planning on a more frequent basis and with greater
strategic emphasis. This is in response to an increasingly competitive business
landscape and competitive labor market where companies are competing to recruit
and retain top quality talent.
With these increasingly competitive dynamics at
play, business owners, human resources professionals and organizational leaders
alike are staying abreast of business, economic and labor market trends, as
well as changes impacting recruitment and retention of top quality employees.
A viable
compensation plan requires year round planning and should complement your
organization’s goals and objectives towards achieving long term sustainable
growth. When conducting compensation planning for your business, consider the
following five key components.
1. Industry & Company Growth:
Growing businesses within growing
industries are becoming hard pressed to sustain continued growth through the recruitment
and retention of top quality talent, and a competitive compensation plan in
place aims to address this. Accordingly, industry growth and business growth
will continue to play an important driver in compensation planning efforts.
2. Total Compensation:
In response to cost increases in fringe
benefits and related costs, proper positioning and communication of these
non-cash components of compensation is paramount in broadening employee
perspective on their individual total compensation package. Total compensation
includes not just the cash portion of pay, but also the non-cash component,
which is commonly the employer’s portion of health insurance costs voluntarily paid
for by the company.
3. Alignment:
Connecting compensation programs
with business goals is key to driving optimal employee performance levels. As
an example, for sales driven positions are generally compensated with a
stronger emphasis on variable compensation in the form of commission, incentive,
bonus, rather than solely on base salary. As sales increase, so does one’s
commission, incentive, or bonus earnings potential.
4. Market Comparison:
Measuring your company’s compensation
program against local, regional and national market compensation trends offers
insight into how your company’s compensation program compares with other
companies in same or similar industries, and for same or similar job functions.
5. Performance & Results:
For businesses to successfully compete for talent and for
profits, tying pay to performance results is pivotal in compensation planning. As
such, companies are adopting compensation programs that reward employee
performance on the basis of employee, team and company results.
Published by Kandor Group, Inc. March 31, 2015
All Rights Reserved.
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