Staff who feel valued, recognized and taken care of more motivated and productive
When it comes to motivating employees to do their best and attracting top talent to a company, it can start and end with a compensation and benefits strategy.
Nearly nine out of 10 employees would consider choosing a lower-paying job with better health benefits over a higher paying job with fewer benefits, according to a 2016 survey by Fractl.
Few factors can affect how an employee feels about their place in an organization and how hard they want to work as much as their pay and benefits package.
What are compensation and benefits?
Compensation is money that an employer pays to employees in exchange for work performed. It’s a basic pillar of the employment relationship and it can take the form of an annual salary, an hourly wage, or commissions, plus the opportunity to earn overtime pay and bonuses.
Benefits include other more indirect forms of financial assistance such as health care coverage, stock options, pension contributions and profit sharing — things that have monetary value but don’t necessarily involve a direct payment of money.
A vast majority of Canadian workers believe that healthcare benefits are a worker’s right, according to a survey.
The importance of compensation and benefits
Eighty-five per cent of workers said compensation was important or very important to their job satisfaction, according to the U.S.-based Society for Human Resource Management’s 2016 Employee Job Satisfaction and Engagement report. There’s little doubt that company payment structure plays a big role in employee satisfaction and motivation.
Ninety-two per cent of respondents in the same survey said that overall benefits were important or very important, indicating that benefits have their own role in employee motivation. A good benefits package can separate different employers who offer similar pay.
Building employee motivation
Keeping good employees as they increase their skills and knowledge while building company culture can feed employee engagement and productivity, as high employee turnover can have a negative impact. The key to retaining talent and getting the most out of them is to motivate them.
Paying employees a good wage not only makes them feel valued, but it also increases their likelihood of being financially healthy. Financial health contributes to engagement and comfort with where they are — if an employee is having trouble making ends meet or doesn’t feel the company values them, they’re more likely to look for better pay elsewhere.
Benefits can provide similar motivation to stay and contribute to the company’s goals. Good benefits feed a sense of appreciation and can make life a little easier for employees. Even if an employee’s wages are lower than elsewhere, if they feel protected with good benefits, they’re more likely to stay and contribute.
The perception of fairness is also important. If employees think that their compensation and benefits are fair, and the way their organization determines compensation levels is also fair, then they are more likely to stay and want to contribute to the company’s goals.
Employers should account for the different wants and needs of the various generations in the workforce when developing benefits plans, says an expert.
Compensation and benefits best practices
A company’s compensation and benefits strategy is one of the most — if not the single most — important motivational factors for employees. Applying best practices to this strategy is key to an organization’s success as an employer of choice.
Understand the company’s budget: The budget sets out how money is going to be spent on various areas of the organization. Compensation and benefits are often the largest expense, so it’s important that they stay within the budget to allow the company to follow its strategy and meet its goals. Sometimes a company may be willing to stretch the compensation budget to land top talent, but the threshold for this should be clearly established if that strategy is in play.
Review employee compensation often: As with any area of an organization, reviewing regularly allows for the flexibility to make any necessary adjustments. Even if the pay structure normally only changes on an annual basis, there’s the chance that unforeseen changes in the market or organizational needs could make adjustments to compensation necessary, such as the cost of living or an increasing turnover rate.
This is particularly important in an age where information on salary data is readily available to anyone online — employees can get an idea of what they should be worth and how other companies would value them.
Create benchmarks for salary ranges: The wage structure within an organization can’t be all over the place — there should be a specified amount the organization is willing to pay for someone in each position, balanced between the organization’s budget, the “market rate” for the position, and in relation to other positions within the organization. If an employee is paid an amount that doesn’t fit within the budget, it may hurt the business.
On the flip side, if the organization isn’t willing to pay wages or provide benefits comparable to or better than the market rate, it will be difficult to fill the position with a good candidate. If an employee’s wage doesn’t fairly compare to that of another jobs within the company, they could feel undervalued.
Establishing benchmarks for salary ranges from the start with logical progressions based on service or performance will help with budget certainty and give employees clear information on what wage levels to expect — which goes back to the importance of transparency and the perception of fairness in how compensation levels are determined. Market rates can be researched with tools such as salary surveys.
Audit compensation: Much like reviews, audits of compensation and benefits offerings should be conducted on a regular basis to ensure flexibility and to identify weaknesses where adjustments should be made. If a company falls behind on compensation and benefits audits, then it may also be falling behind on motivating and rewarding its employees as well as competing for talent.
Higher performance, higher pay: A well-paid employee is usually a highly motivated employee, so companies that reward high performing employees with raises will inspire those employees to keep working at a high level and give others something to strive for. A strong wage structure can attract high performers from outside the organization to join the team, and also give employees assurance that their contributions and value to the company are recognized.
Don’t forget benefits as part of the strategy: While high wages can go a long way to motivating and attracting employees, employee benefits are also important —57 per cent of adults in a 2015 Glassdoor online survey said that benefits and perks were among their top considerations before accepting a job. A good, comprehensive benefits plan that looks after employees’ needs and gives them a feeling of being taken care of can be the difference in being an employer of choice with engaged, motivated employees.