Ultimate Guide to Constructing a Killer Compensation Plan
When it comes to creating and running a solid business, your compensation plan needs to be in line with both your goals and your budget. The simple fact is that, regardless of how much someone loves their job, no one wants to work for free. Likewise, employers expect to receive a fair amount of skill and labor out of employees in exchange for compensation. Unfortunately, creating a killer compensation plan is often easier said than done, but with a little bit of time and research, you should be able to craft one that suits the needs of your business and its employees while retaining top-quality talent.
How Do You Determine Employee Value?
Financial change is a constant in business, meaning you need to not only consider your compensation structure now, but also how it will be defined in the future. This should be planned out when you launch. Economic forces such as inflation, cost-of-living increases and acquired skills over time can all affect how an employee expects to be compensated. Likewise, as your business grows and your employees bring in more revenue, you need to keep costs in line with changes to your organization.
One common method of tackling this issue is to perform an annual review of each employee’s performance and measure the results against the growth your company has experienced within that year. This review allows you to make smart adjustments to compensation based on the productivity and labor output of each employee in a way that is fair to your business and its workers.
Consider All Forms of Compensation
Another factor in developing a killer compensation plan is to take into account all forms of compensation. These days, benefits like health insurance cost coverage or assistance are almost expected to be offered by full time employers, but you may also find that offering things like profit sharing are viewed favorably by employees. Sharing in the profits of a company offers an employee a real stake in the direction and success of the business, thereby motivating everyone to work hard. This approach is often taken when creating recruiter compensation plans or a management compensation plan since these roles tend to benefit greatly from performance incentives.
Don’t Bite Off More Than You Can Chew
While it’s easy to get an employee to take more compensation, it’s often difficult for you to take compensation away. This is why you need to be sure of your compensation plans now and into the future so that you don’t bite off more than you can chew. Nothing is more awkward than meeting with an employee to let him or her know that you’re actually lowering a wage or other compensation. Thankfully, avoiding this problem can usually be done by offering performance-based compensation so that the employee is more in control of how much shows up in each paycheck. Some will choose to simply hire experts that offer services to solve these problems.