Towards an Ethical Compensation & Rewards Culture - A Strategic Proposition | ETHIKALCAREERS KONSULT CENTRES OF EXCELLENCE

Ignoring compensation issues at your organization can lead to uninspired, deflated staff team, low morale, decreased productivity, high staff turnover, with associated overall costs. It is therefore imperative that an Organization's Human Resources Compensation I- Rewards & Benefits Unit ensures the compensation you offer to your employees is competitive enough to keep your team fulfilled and fired up at Peak Performance. By Compensation Culture, we mean here Rewards beyond Financial Salary/Wages but the entire architecture including your HR Culture. Keep in mind several surveys confirm that for most Workers with a vast variety of choices, other Non-Financial co0nsiderations beat why they would chose an Employer over others i.e. High Salaries is not the top decider in Staff Staying or Leaving. As they say, the money may be good, but if you treat your staff unwell, indications are those with options would not stay long and that could dent your Corporate HR Reputation in Professional Circles. Below is a brief outline of troubleshooting and solving come of the most widespread issues of Compensation within organizations.

Instantiating Compensation Problems | A Proactive Approach

Some of the common compensation problems you might find in your organization.

1. Internal Equity

Having internal equity is essential to your organization. If you don’t have it, you risk losing employees and facing lawsuits. Internal?pay equity?means that you compensate employees with comparable positions or skills within your organization similarly. This includes salary and additional employee benefits and perks that come with the job. In most countries, equal pay for equal work is a legal requirement.

2. External Equity?

External equity is what outside companies are willing to pay for the same talent. Therefore, you must consider the broader market and industry when building your compensation structures. If you pay under market rates, you will not attract new employees, and you will lose the existing ones.

3. Perceived Equity?

How employees perceive the levels of internal and external equity is essential. They might be paid equitably and in line with the market but feel they are being underpaid. This can cause them to be disgruntled and less engaged.

How each team member decides whether their salary and benefits are fair varies from person to person. However, usually, these conclusions tend to be made based on a comparison with peers working in the same job and industry.

Therefore, your HR department must manage your workforces’ expectations around compensation so that your workforce feels a greater sense of connection and loyalty to the organization.?

4. Executive Compensation

Executive level and senior management employees play a vital role in your organization because they create your strategic vision and make crucial decisions. In order to keep them satisfied in your company, it’s essential to build the right overall?compensation package.

5. Geographical Differentials?

Suppose your business has team members who live in different cities or even countries. In that case, salaries should vary to account for the cost of living in different locations. This is especially relevant in the current remote work debate. Should you take into account the location of your employees for compensation? If so, why, and if not, why not? How are you going to communicate the differences to your candidates/employees?

6. Rewarding Niche Jobs

It can be challenging for companies to figure out how to create fair salary ranges for emerging or highly specialized jobs.

For example, how, precisely, will you estimate the value of these jobs without a lot of information? And how will that impact other salaries in the same department or team??

7. Salary growth

We are in a candidate-driven market, where potential employees get a lot of power during contract and salary negotiations. Candidate-driven markets occur for many reasons but primarily result from rising demand for talent across industries – especially those seeing unanticipated profits.

This market leads to significant pay increases for those looking for new jobs but can also cause a problem for current employees who see less wage growth. Therefore, your team will need to decide how often and when your employees get salary raises. In addition to making sure salaries are fair with new employer’s salaries, you will need to reevaluate for the growing inflation levels, too.

A Strategy to Troubleshoot & Resolve Widespread Compensation issues:

Based on the points above, it seems there are many ways you can go wrong when it comes to compensation issues. However, with a bit of planning, there are numerous ways you can fix compensation inequalities and make sure you don’t fall back into a circle of compensation problems.

1. Market Research

In order to find out what the current market looks like and where you stand, there are a bunch of resources that you can tap into, such as Payscale, LinkedIn Salary, Glassdoor, The US Bureau of Labor Statistics, and salary and benefits information on competitors’ job postings.

There are also companies you can pay to perform a market analysis on your organization. Just remember, you must consider geographical differences in pay, so if you have remote workers, you’ll need to find local information that pertains to a certain region.?That is if you decide to take geographic differentials into account.

2. Pay Equity Analysis

It is essential that your organization pays its workers fairly and that there aren’t any pay gaps based on any discrimination. This is not only a legal requirement in the United States, but it will also keep your employees motivated to do their best. For example, Pfizer, the well-known pharmaceutical company, does a worldwide?annual pay equity study?on their organization to assess equality for gender and minorities on base pay, merit increases, and perks/bonuses.

You should conduct a pay equity analysis within your company at least once per year to help you uncover any pay disparities.

3. Compensation Metrics Monitoring

Compensation metrics?are essential because they help evaluate how well compensation meets your company’s overall goals. By measuring your compensation practices and policies, you can see whether you should improve them. Tracking metrics like?compa ratio?and?salary range penetration?will also help you spot employee compensation issues when they arise and allow you to rectify them as soon as possible.

Enrolling in a?Compensation & Benefits Certificate Program?will enable you to interpret data and create action plans to fix your compensation issues, make salary adjustments and achieve pay equity at your organization.

4. Competency-based Rewards

Competency-based pay is a pay arrangement that compensates workers based on their skills, knowledge, background, and experience rather than their job title. This pay structure promotes employees to reach the salary they want by improving their hard and soft skills through training.

In addition, this way of paying employees contributes to rectifying compensation issues because it increases transparency in the company since employees will better understand what they can earn and what they need to do to get to the next salary level.?

5. Organisational Compensation Philosophy - Review & Evaluation

A well-defined?compensation philosophy?helps the HR professionals in your organization design a compensation structure, manage?compensation & benefits?programs, determine compensation packages for new hires, and advise the team on keeping your most valuable employees.

You need to make sure that your compensation philosophy reflects what you stand for in terms of compensation. If you do it right, you’ll boost employee happiness, motivate workers to produce a fantastic product, and incentivize employees to stay and grow within the company.

6. Forward-Planning Organisational Compensation Scheme

Compensation planning?is a strategic long-term approach to attracting, retaining, and rewarding your staff, all while taking into consideration your company’s financial goals.

A well-thought-out compensation plan also contains the organization’s pay scheme, bonus structure, and when your team can get raises. If done right, you will remain competitive within your markets and attract and retain top talent.

7. Legalese - Stay Ahead of Regulation & Compliance

Different countries and other continents have different rules on compensation and rewards. Compliance is very tricky because laws and regulations change constantly.

First, you should identify the areas in which the changes affect your organization. Then, you’ll need to change your internal policy, notify the company about the changes, and observe for further updates.

If you work in a large company, you probably already have a legal team and advisors that will support you with this. If you are a smaller team, you should hire experts or involve consultants to ensure everything is in order. Having experts on the team will also allow company owners and employees to ask for guidance when required.?

8. Outsourcing to a Credible Compensation Consultant

It might be a good idea to hire a compensation consultant if you don’t have a dedicated Compensation & Benefits department. A compensation consultant can support your organization by setting salaries and pay grades for new positions, collecting benchmarking data on wages, and recommending bonus structures. This will be especially helpful if you have niche jobs where you can find little information online.

There are many companies and individual freelancers that offer consulting. Just make sure that they have specific experience in your industry, company size, and location(s).?

9. The Rule of Ethics - Transparent Communications

To improve perceived equity, you need to transparently communicate your compensation strategy to your staff. Also known as pay transparency, it is becoming a growing topic among tech companies. In some jurisdictions, it is a legal requirement.

Transparency is vital if you update or make adjustments to your compensation programs.?

In Conclusion

Ignoring and failing to Troubleshoot and Plan for Common Compensation Issues [some of which could become very complex] in your organization can significantly impact your workers, productivity, revenue and aggregate ROI. Not only can you get in trouble legally for not providing equal pay for equal work, but you may have a massive turnover if there are other more appealing offers elsewhere. It makes a lot of smart business sense, to have a highly inspired team. To do so, you must have an Organisational Philosophy, Forward Plan to proactively Resolve any Compensation & Reward Problems. A write up of anticipated and Hypothetical Scenarios with a Resume of Ethical Responses may even be a better position to be in. Stay ahead of the waves.

To Your Success!