Often neglected by small and medium-sized businesses, proactive management of compensation can have a considerable impact on the organization and its employees. While some of the effects can be hard to quantify such as the employee’s attitudes, feelings and behaviours, other outcomes such as improvements to turnover rates, productivity and bottom line profitability will be easier to measure. Here are some of the best compensation practices that all companies can use:
Have a basic compensation structure
Even if you are a small business with less than 50 employees, it is still possible and worthwhile to formalize some of your practices. Some simple steps include determining at what point during the year you will be reviewing salaries, and/or whether it will be done in conjunction with performance reviews. Provide some direction for managers by setting minimum and maximum salary review guidelines, or take it a step further by also providing simple salary scales for your most common positions. The key is to ensure not only that the structure is easy to manage and understand, but that it is also equitable within your organization.
Train your managers
Having a group of well-informed managers will ensure that they are able to clearly explain the compensation policy to their employees. By providing them with the tools to explain how salaries are determined they will be able to support the decisions made at the executive level, which helps give employees confidence in the process. Remember, managers are your first responders!
Communicate with employees
Employees should be aware of the company’s compensation policy, and be kept informed of any changes. This will help eliminate rumours and false perceptions and will ensure better comprehension of the program and the decisional process. To make this communication as clear and efficient as possible, giving employees’ access to a formal written policy which states the objectives and details of the program, makes it more concrete than relying uniquely on verbal transmission. Without divulging salaries, taking a transparent approach also reinforces that the company is handling compensation in an equitable fashion.
Align with strategic objectives
The values and culture of the organization should be reflected in the company’s chosen compensation practices. It should be coherent with the challenges faced by the organization and the strategic choices that are made. For example, if the company values education, then education should be a criteria that is used in determining compensation. As the business strategy evolves, compensation should be modified to ensure that a connection between the two continues to exist. Review the compensation policy regularly to ensure it continues to be aligned with changes both internal and external, and communicate any changes.
Stand out
Compensation and base salary are the principal attraction factors from the employee’s perspective[1] so make sure that your company is competitive and find ways to differentiate yourself from other companies. Generally flexibility is a strong advantage that smaller businesses have over large corporations – use it to your advantage by creating customized plan as a function of the individual interests of your employees.
Need help in creating a compensation structure for your business? Would you like to know the going market rates for your various positions? Contact one of Pvisio’s HR Advisors for a free consultation here, or by phone at (514) 908-4799.
[1] Towers Watson, Le Sondage mondial sur la main-d’œuvre. 2014
