Compensation Edition

Do you have a structure when it comes to paying your employees for your small business?

If not, you may want to start, and here is why…

Have you ever heard that pay is not the number one motivator for employees to come to work? If that's true, why do we have to concentrate so much on making sure we pay right? Well, I know that surveys suggest that there are other intrinsic motivators that keep employees coming to work, like a great team environment, a fun place to work, etc., but after being an HR professional for 24 years, I know that those keep employees motivate in combination with fair pay!

Wouldn’t you agree that the majority of people work to get paid?

Wouldn’t you also agree that if you worked hard and were not paid fairly, that you probably wouldn’t stick around?

If you agree, then wouldn’t it make sense that you, as an employer, should make sure that you have a good system in place when it comes to paying your employees?

To be consistent and competitive internally and externally when it comes to pay, it is important to have a compensation philosophy.

A compensation philosophy is a strategic statement that employers create to be consistent with their pay practices. Advantages to having a philosophy are:

1. Guesswork is removed when deciding what pay range to follow.
2. It makes it easier for a manager to explain wages to inquiring employees.
3. The research required to create the philosophy ensures that internal pay scales are competitive and realistic.
4. Once created, it becomes a working document that can change with economic fluctuations.

So how do you create a strategy, you ask?

Step One: Doing your homework on what the common wage rate is for the positions in your company is the first step you should take.

Step Two: Next, you will need to decide if you are going to pay the same as, better than, or a little less than what you discovered is common.

Step Three: Then you will have to decide what your yearly average increase will be. Will you pay for performance, will you have a cost-of-living increase, and will they be paid together or separately?

Step Four: Lastly, you need to make sure that your compensation philosophy fits in with your culture. If attractive pay, incentives and good benefits is how you prefer to operate, and your organization can afford to do so, then make adjustments to be a top paying performer. If on the other hand, you cannot compete in the industry, location, position etc. look at other ways of being attractive (time-off, flexible work schedules, hybrid working, work sharing, longer lunch breaks, etc.).

Start with those four steps and you will be much better prepared than pulling a number out of a hat.

This is something we get much deeper into in our product offerings. If you would like the extra help, but are not sure if you are qualified to work with us, here is a snapshot of the two types of small businesses that Kiy HR Services Inc. helps.

If your business falls in the first bucket – our all-encompassing program called The Complete HR Blueprint offers in depth training, customizable templates, a group community and two calls per week with us to help you with your business. Click the image to learn more.

If your business is more in line with the second bucket and would like to learn more about how to properly hire and pay your employees, you would benefit most from our Kiy HR Membership. Learn more by clicking on the image below.