Compensation is a key component of any company’s overall budget. I know it is here at Recruiterbox. How you compensate your employees affects your turnover, productivity and of course, your organization’s profit. In most businesses, the compensation plan is left to the HR Department to enforce (i.e. making offers) but not necessarily to influence. This frustrates those tasked with hiring when the compensation plan is either confusing, uninspiring or flat out not competitive.
Since our mission is to help those “First in HR” we want to give you a few tips on building an amazing compensation plan so that when and if you get the opportunity, you are prepared with an arsenal of information to impress. Remember that building a compensation plan is more than just showing off to your leadership, it’s also about making sure that your future employees are fairly compensated, happy and productive. It also helps you immensely as a hiring pro to have both a say in, and knowledge of, your company’s compensation structure.
Ask the Right Questions
Make sure that you ask the right questions before diving into your compensation plan. A site run by professional CPAs offers these as starters:
- What is the life of the plan?
- Who will be responsible for administering it?
- Who will participate in the plan? Just owners, or owners and employees?
- How often and when will payments be made?
- How will you determine the payout?
- How will you measure the goal?
- How will you track results?
- Will there be minimum thresholds or will it be an all-or-nothing payout?
Come with Data
Despite the fact that you are the one hiring, your executive leadership are the ones with their eyes on the bottom line. So you will need their buy-in in order to change or create a new comp plan.
When you do go into the office of the higher ups, be armed with job titles, surveys about those roles and the expected salaries for your market and your current salaries. It’s a lot easier to prove that you need to pay 12% more when you can show your boss that all the companies in the geographical area in which your recruit is, are paying at least that…plus bonuses.
Stay on Top of Things
Keeping your data current is key, especially when you are trying to change an established compensation plan, as many of us in start-ups are. When your founder pulled in several buddies to work for next to nothing right out of college but you are trying to hire a CFO, you need to find current numbers for qualified hires in that vein, as opposed to what your company paid five years ago.
Be a Locavore
As a confident HR pro you also need to make sure your data makes sense for your location. You may walk in armed to the teeth with a $25/hour salary for your jr. graphic designer, BUT in Des Moines they don’t make that…not even close. Try sites like Monster, GlassDoor, SimplyHired or Payscale to get a great idea of what people are paying locally.
Find a Middle Ground
There are lots of sophisticated ways to create a compensation plan but most of them start with a salary mid-range . You’ll also want to figure out the minimum that can be offered for that position, as well as the maximum. Once you go through all of your data and figure out from company leaders what you can afford to pay, you can figure out ways to get to that number in compensation. Keep in mind that cash is not the only thing that companies can offer their employees. Figure out what that number looks like with benefits, perks, insurance, bonuses, commissions, and more.
Get Your Template On
Get your job descriptions together and find out precisely what skills merit what compensation level. Now is also a great time to figure out what merits a pay increase in your organization. This can be a longer conversation as it touches other HR areas like organization structure, internal culture and workforce planning. For instance, figuring out the comp structure for an accountant may lead you to discover that position will, as the company grows, need a new position to support that one, which will have its own pay grade, job description and responsibilities.