Why is compensation and benefits important?

Creating the right compensation and benefits package for each role in your organization matters for many reasons. Let’s explore some of the key advantages below.?

Attracting top talent

Top talent will always be in demand. Therefore, they are likely to know their value and negotiate with companies for a compensation and benefits package that matches this.

Creating a desirable mix of direct and indirect compensation options and relevant benefits can help you bring top talent into your organization, give you a competitive edge, and meet your organizational goals.

Employee motivation & job satisfaction

An undesirable compensation and benefits package that is below average in the industry will leave employees feeling dissatisfied, unappreciated, and unmotivated at work. This can lead to increased absenteeism and turnover and negatively affect team morale.

If your organization isn’t in a position to improve its direct compensation offering, think about the other non-monetary perks you can offer employees to motivate them to perform.?

Increased loyalty and engagement

When employees feel valued and appreciated, they are likely to stay loyal to the company, buy into its mission, and be more engaged at work.

Benefits like flexible working options, child care, health and wellness memberships, and product discounts can all help to ensure your staff feel more valued and more committed to the company’s mission.

Improved productivity

A HubSpot report showed that lost productivity costs US businesses $1.8 trillion every year.

The right compensation and benefits plan rewards employees for their effort and success at work, which can encourage and motivate them to be more efficient and productive. This includes sales-based commission, performance-related bonuses, and team rewards.?

Retention

Reports suggest that the average cost of replacing an employee is between one to two times the employee’s annual salary, and it’s even more for C-suite positions. Aside from the financial costs, turnover can lead to a loss in productivity, morale, and institutional knowledge. Compensation and benefits packages can also help to retain your existing employees, reduce recruitment costs, and prevent any significant absences in the company.

Fairness & adhering to market standards

Aside from national and local laws that stipulate the minimum compensation a worker is entitled to, compensation and benefits help you treat employees fairly in exchange for their services and ensure the company adheres to market standards.?

Source: AIHR