It goes without saying that having the right people in your business is key to its success. UK unemployment levels are at historic lows, and like many business owners, you may have found that successfully recruiting and retaining talent has become increasingly difficult.
The workplace is now a seller’s market – employees can, and are, being more choosy about who they work for. To attract and retain the best talent, meeting candidate and employee expectations has taken on a new importance.
We all want to feel that we are rewarded competitively for our work – looking beyond basic salary and taking a more holistic approach to compensation can set you apart from other employers.
What is a compensation philosophy?
It might sound complicated, but to put it simply a compensation philosophy is essentially a business’s approach to compensation as a whole. This includes all the ways you may reward your employees, so:
- Monetary benefits – e.g., basic salary
- Non-monetary benefits – e.g., paid holiday and wellbeing benefits
- Fixed and variable elements – e.g., fixed annual salary and variable bonus depending on performance
What are the benefits of having a compensation philosophy?
Having an effective compensation philosophy can help you to:
- Achieve fairness and consistency within your team by ensuring that employees receive comparable compensation to their colleagues for performing the same or similar work. This can help you to reduce the risk of an equal pay claim from an employee (for example if you were paying a male employee more to do the same work as a female employee).
- Improve employee morale and productivity by compensating your team competitively and rewarding high performance.
- Attract and retain top talent.
What are some of the key considerations when creating an effective compensation philosophy?
- What are your goals? A compensation philosophy can help you to drive the right behaviours from your team – e.g., if hitting production targets is key to the success of your business, you may want to incentivise employees with a performance-related bonus scheme.
- Affordability – what is your budget? It is really important to find the right balance between staying competitive within the market and being profitable.
- Being competitive – what are other employers doing? Benchmarking is a great way of ensuring you’re competitive in the market. Rise HR can help you to benchmark salaries for different types of roles.
- Being clear on what’s important to your employees -This may vary depend on the demographic of your team, for example if you employ a lot of parents of young children, flexibility to enable work-life balance may be more important than achieving a higher salary. Research by AON1 found 95% of employers felt their employees now prioritised flexible working hours, agile working, mental health, diversity and inclusion and parental leave above questions of pay or perks.
- Regular review – how often will you review the different elements to ensure they remain competitive and effective?
- Communication – how will you ensure that potential, current and future employees are aware of your compensation offering to ensure it’s impactful? When employees understand how you’re paying them, it helps them feel valued and motivates them to work hard.
If you would like to discuss how Rise HR can help you to benchmark salaries or create a compensation philosophy for your business, please do contact your usual contact at Rise HR or e-mail: hello@risehr.co.uk.
By Lara Walton