08 Nov 4 Elements of Effective Compensation Management (Besides Base Pay)
Compensation management is the process of developing and administering employee pay. While salary is typically the first thing that comes to mind when we think of compensation, the reality is that total compensation extends far beyond base pay alone. A comprehensive and effective compensation management strategy should also encompass the following key elements.
- Short-Term Incentives: Short-term incentives (STIs) or bonuses can encourage desired employee behavior and may include monetary or non-monetary rewards. They can be given to individual contributors or entire teams, and may be awarded at different payout frequencies, including annually.
- Benefits: Medical, disability, life insurance, paid time off, and retirement benefits are among the most common types of employee benefits, but the options are virtually endless. While some are mandatory, including workers’ compensation coverage, communicating the ways in which your organization goes beyond legislative minimums can support a more compelling employee value proposition.
- Long-Term Incentives: Long-term incentives (LTIs) such as group saving plans and stocks and options are favored among many employees, but employers must be careful about controlling their costs as they can become expensive. Limiting eligibility and putting proper terms and conditions in place is essential to an economical approach.
- Additional Perks: While it is by no means obligatory, many employers are offering non-traditional perks to incentivize specific employee behaviors. Subsidiaries for transportation, fitness, and other costs employees incur, as well as personal development opportunities and extra time off, are some popular options to consider. For best results, companies should choose non-traditional perks that align with their employer brand.
When combined with base pay, the elements listed above comprise a robust total rewards program. While developing total rewards plans requires thoughtful planning, it is equally important to craft a plan for effectively communicating the program details to employees. After all, a total rewards program that isn’t acknowledged by the workforce for which it was designed serves little purpose.
HRsoft is the trusted global leader in compensation management software whose COMPview solution is proven to control and simplify the full process and allocation of merit, bonus and equity awards to drive manager and employee engagement.