Maximising Employee Satisfaction Through Effective Compensation: Best Practices
The employee experience matters more than ever before. Companies need to step up and show their people that they matter. But in the current economic climate, where hiring freezes are combined with a lack of suitable talent, this can feel like a challenge.
One of the best places to start is ensuring employee satisfaction is high. While there are many different factors that go into employee satisfaction, one of the most important issues is compensation. When looking for a new job, 41% of job searchers they’re looking for a substantial salary increase.
But employee compensation doesn't just include take-home pay. Here’s a breakdown of what it typically covers:
Salary and wages: The money that each employee receives in return for their time and expertise. This is usually processed through payroll on a fixed schedule. It may be an hourly wage, daily rate, or annual salary. T typically includes commission if employees work on this basis.
Employer-provided benefits: These might include health insurance, retirement plans, profit-sharing, paid time off, stock options, maternity or paternity leave, and more. Some of these are statutory and others are discretionary.
Additional benefits: Anything that doesn’t fit into the above categories. This could include free on-site parking, flexible working, home-office stipends, wellness programs, career advancement programs,
Bonuses: Some companies pay an individual bonus for meeting or exceeding a specific target, while others may pay an overall bonus annually. Bonuses will typically be paid out by payroll, but won’t be on a fixed cycle like salary payments.
These monetary and non-monetary benefits come together to create your total rewards strategy, or compensation plan. In this article, we'll explore how using best practice can help you create an effective compensation plan that not only offers a competitive salary, but also communicates these benefits to boost employee satisfaction.
Why employee satisfaction is important
One key factor that can help boost employee satisfaction is fair compensation — because people feel that their time and expertise is valued. When employees feel that they’re being paid fairly, they feel happier in their job. That’s why employee satisfaction and happiness has been shown to boost productivity by up to 13%.
When it comes to employee satisfaction, compensation isn’t the only factor at play. Working for a competent manager, having workplace autonomy, and completing a variety of rewarding tasks are also important. But as compensation is so tightly linked to employee satisfaction, it's vital to get this piece of the puzzle right.
Effective employee compensation best practices
To help you develop an effective compensation plan, we’ve outlined four best practices to help maximise employee satisfaction.
#1 Ensure clear communication
You can have the best compensation plan in the world, but if it’s not communicated effectively, then the impact can be lost. That means it’s vital to create a compensation communication plan that ensures company benefits are easily explained and clearly communicated. You could share physical compensation statements, or use a software platform that offers a digital statement. It’s a good idea to share these statements annually, for example during a yearly performance review.
If you conduct pay reviews more often, then offer updated statements at that point. In addition to documented resources, face-to-face communication during team or one-on-one meetings is also vital. It’s during these conversations that you gain further insights into how each employee feels about their compensation and whether they’re satisfied and engaged with your processes.
#2 Use transparency to promote trust
We all want to know we’re being compensated fairly for our time and expertise. Historically, employees may only have found out that they were being paid less than a co-worker through individual conversations. But a lack of transparency around salaries can end up perpetuating the gender pay gap.
In order to promote transparency, Employers in the European Union now need to include pay ranges within job adverts, and those with 100 or more employees also need to report on their gender pay gap. Improving transparency can help promote trust, because all employees can see they’re being compensated fairly. Creating a compensation philosophy is a great way to detail your company’s values, vision, and core principles, so employees can clearly see how this fits within your culture.
To make reliable decisions, you need data. By using up-to-date benchmarking data that can compare a range of factors like industry, funding round, and revenue model, you can set competitive salaries that help boost employee retention and satisfaction. By showing your employees exactly how their pay is determined, you can promote trust and boost retention.
Annual reviews are common, but many companies are now moving toward more frequent reviews, mainly in reaction to a volatile market. Using a compensation benchmarking tool means you’ve got access to high-quality, accurate data that allows you to quickly compare how your compensation compares to any competitors. This makes it easy to decide on any salary increases plus accurately forecast how much budget this will require.
#4 Offer an overview of your total rewards
Whether your company’s salary bands fall above or below average market rates, it’s a good idea to clearly lay out each employee’s total rewards. That’s because compensation is more than salary alone.
Your rewards package may contain other benefits, for example, covering commuting costs, that help boost employee satisfaction by mitigating the effects of rising inflation or solving other specific pain points that your team has raised.
Optimise employee satisfaction with the right compensation
Creating an effective compensation plan doesn’t have to be hard, but you do need the right tools. Join Figures now and begin your effective employee compensation journey
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