Just because your organization has an established compensation plan doesn’t mean it’s working well anymore. It’s very possible that trouble may be brewing. The signs may be subtle at first, but the problems will only build until the entire thing breaks down. Now, I don’t want to scare you, but I do want to educate you on some of the symptoms of an existing compensation plan that’s about to fail.
What You Have May Not Be What You Need
It can be tough to arrive at a company and have to deal with the existing compensation plan or, worse yet, have little say in making it better. But the truth is, with some real insight, there are ways to improve the existing compensation plan, how it’s managed, and the overall impact it can have on employee engagement and productivity. If you don’t speak up, who will?
Here are some signs that the existing compensation plan is not up to par and needs some attention.
It’s a “One-size-fits-all” Philosophy
In an effort to be fair, companies can often resort to creating comp policies that treat every employee the same. This strategy doesn’t necessarily motivate most employees, especially the success-driven Millennials in the workplace today. This is a huge sign that the compensation strategy is not living up to expectations.
Your Data is Outdated
Using compensation data from last year, or even older? Sound the alarm! This is a big sign of trouble because a lot has changed in just the last few months in terms of salary ranges and competition for the kind of people you hire. Get the salary data that’s based on what’s happening right now in your industry. You don’t want to be left behind.
Your Job Descriptions are Too Basic
If it’s been a while since anyone has taken the time to evaluate job descriptions, including responsibilities and compensation, then your strategy is headed for trouble. Think about this – the company is hiring for unique jobs and if you don’t have a good idea what the market rate is for the best candidates out there, how can you pay them well?
You Avoid Transparency
Why is salary transparency important? It can reveal inequitable practices and pay disparities which can leak out and cause a breakdown in employee morale. Salary transparency can be done on many different levels and it is important to determine what is right for your company. However, if you’re not talking about pay with your employees, know that they’re probably talking to each other. If this makes you want to hit the panic button, you might want to reconsider your practices.
Pay Isn’t Linked to Performance
A good compensation strategy includes a strong connection between performance management and merit increases, as well as other types of incentives. If your pay is not linked to performance, how can it ever be effective for driving employee engagement and motivation? Create a performance system that connects the dots.
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