Have you ever sat in a room and felt cold? You put your jacket or sweater on to warm up because you are uncomfortable. I’ve felt this in more hotel conference rooms than I can count!
If you are in a cubicle or office space that is cold, you may run a small space heater below the desk to warm up. (Shhh...don’t tell property management or facilities.) Or if you are too warm, you may have a fan that moves the air so you can cool off.
I often think of compensation like the temperature in a room. If it is just right, it’s not noticed. There isn’t too much or too little being delivered to employees.
It takes a lot of focus and consistency to get compensation right, but it is do-able.
So, think about what you are delivering to who: Base pay, bonuses, sales commissions, allowances, overtime pay, long-term incentives, and other rewards. Is it just right? Too much? Too little?
How do you know if compensation is too much?
· Few employees are leaving willingly. Recruiters aren’t calling them because your reputation as an employer is that you pay a lot. And the few who leave say it wasn’t because of what they are being paid. It was a toxic manager or job responsibilities that weren’t providing growth or meaning. You also have huge numbers of candidates to choose from for open jobs because of what you pay.
How do you know if compensation is too little?
· You make offers to qualified candidates and they aren’t being accepted. This is a consistent trend. You have many employees quitting because they can make more money at other employers for similar jobs. Your managers and HR are consistently having employees ask why job postings from other employers are showing higher salary ranges than you are using. Your turnover costs are through the roof and your number of job openings never seems to decrease substantially.
If you know that total compensation is just right (competitive and equitable) and you still have employees complaining or quitting, review how you are communicating to your employees about their pay.
You can deliver competitive total compensation but often what makes it not enough is how it is communicated by an employee’s manager. Most managers have these conversations with their team members once a year during the annual compensation planning process. It is that one time of year when everyone is thinking about their pay and performance.
Make sure that you are providing your managers and employees with resources so they can explain and understand why they are receiving each component of their total compensation.
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