2010 is still a tough market, for both employers and employees. Employers are managing budgets tightly and employees are feeling overworked and uncertain. Businesses and families are getting “back to basics”. Below are some suggestions to help your organization get your compensation programs “back to basics”:
– Compensation Philosophy: A compensation philosophy is a company’s commitment to how it values employees. For companies in the private sector, this usually requires a competitive pay philosophy. For companies in the public sector, this means a well-rounded philosophy, with a focus on benefits and work life.
Companies must define:
- How competitive do you want to be with the market?
- Who do you compete with?
- How much can you afford to pay?
- Be sure to account for total rewards (pay, benefits, work-life balance, etc.)
– Compensation Systems: Now that you’ve defined your Compensation Philosophy, be sure you have the Compensation Tools in place to manage your pay programs:
- Base Salary Structures: You need to know what the “going rate” is for key skill sets in order to be sure you remain competitive.
- Incentive Plans: Define your “total cash compensation” position (base pay + incentive pay) and what the incentive pay is based on (Company Performance, Financials, Management By Objectives (MBO’s) etc.
- Internal Equity: Jobs of similar value (knowledge, skills, experience and accountability) should be rewarded similarly. Individual employee performance has an impact as well, but you should strive to target pay that is fair and equitable when applicable.
– Performance Management: Giving feedback to employees is free and sends a very strong message that you value their contributions during these difficult times and want them to stick around for the better times to come. If you haven’t given your employees Performance Feedback in the last 12 months, do it now! You want them to know where they stand, especially when the market starts to come back. That way employees can’t say “I didn’t know how I was performing.”
Remember, Performance Management is a two-way process, so if your Manager hasn’t given you your Performance Feedback, it’s perfectly acceptable to ask for it! They may think they don’t have the time to do it, but if you ask for it specifically, or provide them with a self-assessment, that may be just the push they need to get the process rolling.
– Pay for Performance: While the market is showing signs of strength, many companies may not have a “pot-of-gold” to spend on employee investments. You can still make the money go a long way by making sure you spend it wisely:
- Focus on your key performers: Who is critical to retain?
- New hires and recent college grads: Are they keeping up with the market?
- Average performers: If they’re meeting “average expectations” they may not necessarily need a salary increase if they’re keeping pace with the market
- Needs improvement: Take the time to work with those employees that need to improve their work. Document a Performance Improvement Plan to help them get back on track.
- If you can afford to do merit increases for your “key performers” in 6-month increments, this will send them the message that while you can’t make up for lost time, you can give them smaller merit increases more often.
Once you’ve got your compensation program in place and you’ve made decisions around designing a fair and equitable program, you can begin to implement compensation decisions accordingly. As we near the turn of the year, what are your plans with respect to compensation decisions in the coming year?