Compensation refers to all forms of pay and rewards received by employees for the performance in their jobs including all forms of cash, benefits, services, and perks. It is important to recognize and communicate your “total” compensation as “all” the pay you are providing your employees. This should be done so that the value of what you are offering in compensation is clear and that it in turn attracts and retains the people you need.
Compensation is given in financial rewards that are either:
• Wages and salaries
• Bonuses and commissions
• Stock options
Indirect benefits are costly to you and their value should be communicated and acknowledged when discussing the compensation you offer. When accompanying a base wage or salary with incentives, bonuses, and/or benefits, you in turn create a compensation program that should support the values and goals of your business.
When developing your business’s total compensation program it is important that you understand and incorporate what is important to your business and its objectives. Consider creating a combination or variety of elements to your compensation program in accordance to your employee demographic and budgetary constraints. Program design, guidelines and procedures should always be tailored to contribute to your business’s success within the context of its operating environment. Ensure to include the following:
• The different elements that will comprise the total compensation your business offers to its employees
• That it is comparable or competitive within the industry
• That it is internally fair; meaning that there is a logical increase in pay dependent on things like length of service, job performed, or the skills or abilities required to successfully complete the job
• That there are established criteria that result in pay increase
• A means of measuring and controlling your payroll costs
• A means of measuring the success of your compensation program. For example being able to determine how competitive your compensation is in relation to similar businesses, and whether it accomplishes targeted outcomes of retention, performance and motivation.
The objective of compensation is to do the following:
• Attract employees
• Meet legal requirements
• Retain valued employees
• Motivate performance
• Motivate personal growth
• Sustain high morale
Some current trends in compensation are linking pay to performance objectives, competencies or skills required to perform the job, larger business strategies or goals, the position in relation to its importance of the business strategy and/or rewarding team accomplishments. It is essential that you realize the importance of compensation and the flexibility you and your business have in creating a more customized compensation package. This will in turn promote the attraction, retention and development of quality people.salary negotiation