Clearing up the confusion about compensation plans

You may not be surprised to hear me say that compensation programs can be difficult to understand at times. Compensation programs can be complex, leading to confusion for some employees.

That’s too bad, because if employees are confused about how they’ll be compensated for their hard work, they may fail to meet performance standards. When this happens, disappointment ensues. Employees may not get the wage increases they believe they have coming to them, and employers may not get the performance they want.

For example, merit-based, on-the-spot bonuses are an excellent way for employees to increase their compensation levels while earning the encouragement and recognition they deserve. However, your employees may not know about these opportunities and how to shine in front of their management team.

Employees need to know and understand your compensation and benefits programs to stay engaged and productive. Keep reading to learn where employee compensation plans can get confusing and how you can make them less confusing.

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Communication breakdowns

So, what’s to blame for employees not knowing about or understanding their company’s compensation program? A major cause is communication breakdowns. Whether the breakdown occurs purposefully or by accident, it still happens.

Employees may not read the information given to them, they may read it and not understand it but decide to forgo asking questions, or they may read it but promptly forget about it. On the other hand, the company may not explain the program as well as it should. A 2015 survey from WorldAtWork found that 40 percent of employers admitted to communicating “minimal information” when it comes to compensation programs and bonuses.

Fixing the problem

With a good number of companies admitting they only offer their employees minimal information about bonuses and other compensation items, things need to be corrected. How?

Frequent communication is key and that includes communication across a variety of mediums.

For example, consider spreading the word via routine emails, the employee handbook, posters around the office, staff meetings, and one-on-one meetings with managers or human resources, as appropriate.


Compensation programs should be discussed during the interview and onboarding processes as well. And don’t forget your managers need to understand your compensation plan as well.



The bottom line here is that if employees don’t understand your compensation program, it won’t provide the hoped-for incentive. That’s why employers need to communicate about these programs frequently as well as offer the best possible base wages and benefits to keep employees actively engaged in doing their finest work.


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