Using Compensation Planning to Improve Engagement & Retention

Using Compensation Planning to Improve Engagement & Retention


Improving employee engagement is a major priority for today’s organizations, and for good reason: companies generate 2x the amount of revenue when their employees are engaged, according to Entrepreneur.

While employee engagement is a broad topic, it must be improved using very specific strategies. One such strategy is effective compensation planning.


How Can Compensation Planning Help Improve Engagement & Retention?

Disengaged employees are less motivated, less productive and over time, are more likely to leave the company for better opportunities elsewhere, thus creating high turnover rates.

According to PayScale survey findings the main reason why employees left in 2014 is due to compensation issues (although this can vary from company to company) which can be related to base salary, commission, overtime pay or end-of-year bonuses. In response to that, about 63% of the companies have referenced retention as top focus of compensation and more than half of the companies that were surveyed use some form of pay-for-performance strategy.

After seeing all this data, it is clear that many companies already believe that compensation plays a major role in employee engagement and retention. The real question is – how successful are these attempts?

We all know that employee engagement and retention needs to go beyond just a hipster looking office or an occasional company retreat. And we are not suggesting that your engagement and turnover challenges will be instantly solved with compensation. It is clear, however, that improving engagement requires a multifaceted approach – on that includes a well thought out compensation strategy.


Why Is Compensation Planning A Relevant Retention Strategy?

As much as it is a cliché, money really matters when you are trying to engage employees. Despite the many interesting employee perks and innovative work life balance approaches, it is essential that employees feel that they are being paid fairly for the amount of work that they put in. While things like work life balance play a big role in their corporate lives, money and benefits are still one of the most decisive factors that employees consider when deciding whether to stay or to leave the company. In order to attract and retain top talent, the compensation package has to be attractive and effective.


Setting Up The Strategy

There are three steps to leveraging compensation planning to increase employee engagement and retention. Compensation planning can be fairly complex and has to take into account many factors (profit sharing, performance metrics etc.), but these are the key strategies you can implement to create a successful compensation plan:

  1. Identifying Your Top Performers
  1. Reward for Retention
  1. Show and Tell (The Money)


While there’s much more that’s involved with the steps listed above, you now have a broad overview of what must be done in order to boost engagement through compensation planning. If you’re interested in learning more about the best practices for each of the three main steps listed here, feel free to refer to the insights found the HRsoft blog. You can also visit the product page for COMPview, a software solution that makes compensation planning simple, aligned, and effective for busy organizations that need to keep their employees engaged and motivated.


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