01 Apr 4 Questions Enterprise Compensation Management Should Answer
Enterprise compensation management (ECM) refers to the ways in which pay policies are administered, organized, and automated in companies. Because compensation accounts for a significant portion of overall business costs – up to 70% – it’s important to ensure pay is achieving what it’s intended to do. Specifically, ECM should be able to answer the following questions:
Does our workforce feel they’re being fairly compensated?
Fair compensation is two-pronged: while resources like PayScale are available now to help employees compare their pay to the market, it’s also important to make sure your workers feel that they’re being paid fairly compared to others within the company. To that end, every organization should have a well-defined compensation philosophy which explains how employees are rewarded for contributions.
Is our total compensation in line with what competitors are offering?
While many organizations aim to pay at market value, others may have a need to pay below or above median pay ranges. Startups, for example, may not be able to pay as competitively, but they may offer attractive benefits instead. On the other hand, companies whose success depends on the ability to attract and retain highly in-demand professionals may need to pay above market value for those roles.
Is total compensation broken down into the most attractive options?
Beyond base pay, compensation should also be optimized to offer the benefits and additional rewards that work best for both the company and its employees. Taking the time to determine which rewards your workforce values most is well worth the effort.
Are we using compensation to reduce churn rates and control costs?
Turnover costs are estimated to be 100-300% of the base salary of the employee being replaced, so retention should be a key area of focus for your compensation plan. Unfortunately, more than a third of employers struggle to retain their top performers. Finding ways to reward these high-value employees by offering the options they consider most important is therefore critical to reducing turnover costs.
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