How does managing Employee Compensation relate to overall Business Goals?

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How does managing Employee Compensation relate to overall Business Goals?

Payroll represents a huge amount of a company’s outlay. Those resources should play a significant role in guiding employees toward performing duties and encouraging behavior that contributes toward the company’s success. Otherwise, the money is ill spent.  To that end, a total rewards plan, which includes cash compensation plus benefits, can be developed that continually recognizes and rewards team and individual success as well as meeting company goals.

  • There are many forms of employee compensation and benefits, some dependent on the nature of the organization::
    • Sales incentives,
    • Piece-rate production,
    • Regularly occurring or special bonuses,
    • Fixed and variable plans.  
  • Each form of compensation sends a strong message to employees as to what is valued within the company.  Aligning compensation plans in a way so that there is a direct link between individual, and work group performance and success toward meeting business goals is the desired outcome. Such direct alignment ensures that payroll dollars are being used in the most effective manner and provides the best ROI.
  • Compensation plans also meet other business needs:
    • Providing competitive pay and benefits sufficient to both attract and retain top talent.
    • Meeting all federal and state employment laws related to how employees are paid.
    • Providing a structure for the defensible setting of pay for employees without regard to sex, race, age, disability, and other protected classes of employees.
    • Establishing pay plans to prevent the overpayment or underpayment of employees based upon documented skills, knowledge, education, and experience.   Salary ranges should have both minimum and maximum rates for each position.  Pay below established minimums or maximums should also be managed in a way supportive of business needs.
    • Providing transparency for all to see and understand how pay is established for new hires and how pay changes for existing employees.
    • Supports performance-improvement plans.
    • Provides for general fairness and consistency which is good for employees and good for the business as a whole.
  • When calculating and reporting on company-provided benefits, be sure to include all expenses the company is incurring regarding compensation. For the employee annual communication about total rewards, be sure to include the value of all reward and benefits, not just cash compensation.