16 May 5 Must-Have Elements for Every Compensation Management Process
The compensation management process lays the foundation for a company culture that recognizes and rewards strong performance. When done correctly, it ensures employees are paid fairly and have the incentives needed to either improve performance or continue producing excellent results. To achieve these goals, compensation management must encompass the following elements.
1 Budget Allocation
Budget allocation determines how much the organization has to dedicate to employee pay, and how much of that budget will be spent on base salary versus benefits and other incentives.
2 Salary Ranges & Audits
Compensation and benefits professionals use salary ranges to benchmark jobs within their industry to create structures for paying their employees. This is increasingly important, as employees now have resources like payscale.com at their disposal to determine whether they’re being paid competitively.
In addition to salary ranges, pay should be audited regularly based on factors such as talent demand, competition, and your business cycle.
Employee benefits packages are offered in addition to base pay as a means of attracting and retaining the workforce. Health care, retirement, and tuition reimbursement are some examples of types of benefits which factor into total reward packages. There are also legally-required benefits employers must provide.
4 Performance Management
Performance is a major component of employee pay and should be overseen by the employee’s direct supervisor. A structured performance management system should support the completion of individual and company goals, and requires ongoing appraisals, coaching, and mentoring.
5 Legal Compliance
Finally, a thorough compensation strategy must encompass legal compliance to ensure the organization satisfies all state and federal laws. Pay practices must comply with the Fair Labor Standards Act, minimum wage, overtime laws, and antidiscrimination regulations, for example.
Of course, after the official planning is complete, you should still have a structured administration process to carry out an annual process, ensuring each of the tasks listed above is completed in a timely manner. This is precisely where a compensation planning tool can assist you, as it features tools for budget allocation and salary ranges, ensuring all managers have the information and resources needed to make the best pay decisions for their teams.
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.