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more.Compensation and Benefits- Your organization’s most powerful asset is its people.
Compensating them for their contributions
is a critical part to attracting, motivating,
and retaining employees so your business can grow.
To determine what to pay your employees for their work
and how to reward them for their successes,
there are several things to consider.
First is your organization’s culture.
For example, if there is emphasis
on teamwork and collaboration, you’ll likely provide
similar benefits across all levels
and deliver standard pay increases annually.
If the emphasis is on individual performance,
your pay structure might include bonuses
for reaching individual goals.
Also consider the needs of your workforce.
What benefits will they find valuable
given their particular age, skills, and experience?
An attorney I know told me that she was frustrated
because as the owner, she was matching 401k contributions
and none of her employees seemed to notice.
Instead of being angry at them,
it was important for her to realize
that she needs to spend that money
somewhere that mattered to them.
What if they all wanted childcare supplements
for their daycare costs, or what if
they preferred vacation time to the money?
Something for her to talk to her employees about.
Also think about your industry.
Does the pay you offer have to match your competitors
in order for you to retain top talent?
Not necessarily, but you’d have to
offer something to offset that.
One tech company I worked with
knew that they didn’t pay as well as competitors,
but employees were free to inovate
without the confines of a strict, corporate culture.
That suits the needs of newbies, right out of college,
who were drawn to work there because
they could stretch their wings.
After learning what they could,
and once they got a little older
and started their families, then they moved on
to higher paying jobs with a lot more structure.
The company gets great talent for three years,
employees get to learn, and everybody wins.
Finally, consider internal equity.
You must have some clear guidelines about how you
compensate for different levels of education, experience,
special skill sets, and productivity.
If two people with the same job
make different amounts of money,
you have to justify why one makes more than the other.
Once you’ve gathered this general information,
you need to determine pay structure
and there are several options.
Many organizations offer base pay,
which comes in the form of an hourly wage or a salary.
Employees either get paid for each hour
they clock-in or they receive a set amount
each month regardless of hours worked.
Other organizations, generally those
with union presence, offer flat-rate pay, which means
everyone in a particular job receives the same pay
regardless of seniority or performance.
You could also choose to offer
performance-based pay, which means that
employee’s own performance dictates the amount of raises
and when those raises are received.
If you go this route, you absolutely have to be sure
you can connect performance to pay,
and you have to be able to address
employee’s arguments that they’ve performed
better than they’re getting credit for.
Another option is productivity-based pay,
which means that employees get paid for items produced.
This might be a good option if your workers
are performing a task based on pieces.
A factory worker might receive
an hourly wage and an additional $0.50
for every item they assemble, for example.
Personally, I’m a fan of doing a mixture
of base pay and performance pay.
You might pay your Customer Service Reps an hourly rate,
but provide a bonus or extra incentive
when their quality scores are above 95%
or if they answer a certain number of calls above quota,
but again, you always have to be sure that what you’re
offering for performance is a motivator for employees.
Otherwise, it won’t make a difference in their performance. The bottom line is that there are a lot of ways to pay your employees and there area lot of payroll nuances, such as taxable wages, social security, and health insurance. For that reason, many small businesses hire a payroll specialist to help or use a payroll software that can run calculations for them, and I recommend you consider doing the same.
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