The compensation plan is a combination of salaries, wages, and benefits that an employee receives from its employer in exchange for work. It includes annual salary or hourly wages, bonuses, incentives, and employee benefits such as health care coverage, retirement savings account, and short-term disability insurance.
A compensation plan should be a mirror to company’s culture and should motivate its employees to work towards achieving company’s vision. Here is a guide to improve or establish the compensation structure of your company.
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The benefits package should reflect company’s vision
If you want to nurture your employees in order to make them stick around for long term, your benefits package should reflect that. You can either provide them generous retirement plan or help them develop their skills by reimbursing their tuition fees. A commission based on the performance or target may also work well. By having a look at the compensation plan, employees should be able to figure out how valuable they are to the organization and how their company is making efforts to keep them.
The compensation plan should fit company’s budget
Even if your company is making profit and everything is going well, you don’t have to be too generous with the benefits package. You need to keep in mind that your benefits package has to be consistent as you cannot provide a meager plan during the off years. It is okay to add a benefit or two, but cutting back from the existing one will only lead to eye-rolling. Whatever the circumstances may be, cutting back the benefits will only demoralize the employees and will diminish the trust and respect that they have for the company.
Pick your options
There are plenty of employee benefits that you can include in your benefits package. So, you can pick the benefits that suit your budget and organizational culture. You can provide really unique benefits in addition to incentives and bonuses. You can provide some family-oriented benefits like daycare reimbursement or onsite childcare. You can provide benefits like 401 (k) to help employees with their retirement fund or some other benefit of similar type. Offering unique benefits to the employees will not only lead to employee engagement and motivation, it will also increase the employee retention and affect the turnover rate.
Make sure nothing is left vague before involving anything in your company policy
You may want to take help of your lawyer to make sure everything about the compensation policy is clear and precise. Whenever you are recruiting new employees, you may need to explain about the benefits package to the new hires, so that they are aware of all the benefits that they will be receiving by being a part of your company. Be open to employees' questions, as at times, they may be confused about how the compensation plan works and it's company's duty to make sure that each employee within the organization is well aware about the company policies.