11 Jun 3 Employee Compensation Changes to Consider Making in Your Company
The ability to attract and retain talent is largely dependent on the ways in which you reward your employees. While factors such as organizational culture and values do play an important part in the modern worker’s decision to stay with a company, employee compensation will always be one of the leading factors on which career decisions are made. To keep up with the expectations of today’s workforce, consider modernizing your compensation practices with the following changes.
1. Eliminating Annual Reviews
While employees certainly need feedback to receive praise for a job well done or course-correcting guidance when they’ve gone off track, the time and place for this coaching is not in the annual review. The annual performance review is typically dreaded by managers and their direct reports alike: not only is a 5-point rating system far too rigid to grade an entire year’s worth of performance, but annual reviews also require a significant amount of time and effort.
A better alternative is to use some form of incentives to motivate and reward employees based on measurable goals. Then, train managers to have performance-based conversations with their teams frequently to discuss progress on those goals, so employees know exactly what they have to do to qualify for rewards.
2. Emphasizing Variable Pay
Instead of increasing base pay, which can quickly become costly for employers, consider implementing a dependable measurement system for variable pay. Variable pay can be an excellent motivator, especially among new employees. When they sign on, variable pay provides an opportunity to make more than their base pay and can thus spur employees to achieve aggressive goals. Now is the time for employers to de-emphasize base pay and start using distributed gains which can be awarded through bonuses and based on goal attainment.
3. Improving Quality of Life Rewards
Since many organizations are facing tight budgets for compensation and benefits, employers have become increasingly creative with quality of life rewards. Small rewards – even written thank you cards for employees who have gone beyond their typical responsibilities – can have a major impact on morale. Flexible work arrangements and clear career paths are also typically highly valued among today’s employees.
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