Four Point Strategic Approach..

Four Point Strategic Approach towards Employee Compensation and Benefits

When it comes to compensation and benefits, it is not surprising that it is something that employees hold close to their heart.  A well planned compensation strategy enables a business to compete in the market for acquiring the best talent for its industry.

For structuring a successful strategy, one can keep in mind the following four important dimensions that play a major role in designing the compensation and benefits plan:

1. Attracting Quality Employees

A strategic plan for compensation plays an important role in attracting a large base of competent employees. Paying wages at or above the prevailing wage in the market for one’s company’s industry allows one to demand workers having more experience and positive work histories. Hiring more qualified workers yield better results, including higher productivity and customer service interactions. This in turn increases the company’s revenue and helps in expanding business by increasing goodwill among consumers.

2. Rewards for Performance

A compensation strategy also includes rewards for employees based on their performance. It may be a commission-based system that rewards employees based on total amount of sales or for consistent positive feedback from customers. A reward system should be unambiguous and transparent to the employees. It should be encouraging and attainable enough at its lower levels to motivate employees to work harder to reach higher goals. Setting up a performance level too high for employees in their early phase in organisation often proves to be faulty and such a reward system is often ignored by the employees.

3. Encouraging Employee Retention

Rewarding employees for their loyalty towards the company is one of the most important strategies that are followed for retaining quality workers. Compensation relating to seniority with the company substantiates the company’s regard for loyal and long term relationships. This encourages new employees to make a commitment to build a career with one’s business and deters established employees from jumping to other companies. The experienced workers are forced to think twice about pursuing another opportunity if the new job also comes with a pay cut.

4. Perks and Benefits

It is one of those critical sections in a compensation plan that can make or break a company’s ability to attract the best and brightest in the industry. Offering health insurance benefits to full-time workers should be of major concern in the compensation plan. It can be combined with other company perks, including paid holidays and guaranteed paid vacation time, to attract more qualified workers to business. The decision to offer these benefits is also contingent on the success of the company. A company may choose to add health care coverage and paid time off to its benefits package only after the company is showing profitability or makes it past the first year.