Resource Library Article:
What to Pay Your Employees to Motivate Them
Employees are your most important investment. To have the best employees motivated to do their best work, you have to compensate them accordingly.
Most companies make the mistake of viewing “Compensation” as salary. Repeatedly, studies have shown that employees make job decisions based on factors other than pure compensation such as benefits, opportunity, or fit with organizational culture and/or supervisor.
Employees will use all of the following when evaluating a job:
- Monetary
- Base pay
- Compensation
- Benefits
- 401k contribution
- Fit
- Workplace envrironment
- Culture
- Flexible work schedule
- PTO
- Motivation
- Job responsbilities
- Opportunity for advancement
- Rewards/Incentives
- Training
Determining “Total Compensation”
The first step in determining an appropriate wage for your employees is to clarify job titles for each position and consider the relative value of the position within the organization. Resist the temptation to just label everyone as an electrician or service tech. Be specific and write job descriptions with measurable responsibilities and outcomes. Also outline the progression in skills and responsibilities that are expected as an employee advances from entry-level, to experienced, to senior-level roles.
The second step is to find out what the standard rate is for the positions and responsibilities you have defined, and to compare them with what is currently being paid i.e. figure out what your competitors are paying. Use a combination of online resources like Salary.com, trade publications and associations or the U.S. Department of Labor to find out what a competitive wage is for a specific position.
When evaluating compensation packages, do not make the #1 mistake of considering base pay alone. There are numerous benefits that may already be in place such as health care, workplace culture, working conditions, flexible scheduling or generous overtime policies. All of these things should be viewed as adding value to the overall package being offered to employees.
The value of these benefits will be different for each employee. The benefit usually valued most, may be of little value to an employee who is covered under a spouse’s plan. But it may be of utmost importance to an employee with a family, or an older employee. Ask your employees to determine what benefits would offer the highest perceived value.
Before any new hire, consider how the compensation package fits into the current compensation structure.
Offering a competitive wage does not apply only to new hires. As a business owner, be aware of how current employees’ compensation measures up to what the market may offer, and continue to reward employees you hope to keep. When adjusting the pay of a current employee at a minimum keep up with inflation.”
Raise compensation based on merit rather than following a one-size-fits-all raise policy. Compensation based on job performance will prevent overcompensation of inferior employees and insufficient reward for your most valued workers.
Standard operating procedure is to evaluate a compensation plan yearly to make sure it is working for both the business and the employees. Benefits come up for renewal annually, which provides an opportunity to examine what else is available.
Seven Key Success Factor’s in Determining Total Compensation
1. Start with the end in mind: A. what are the business objectives B. what must the workforce achieve to reach these objectives and C. what individual jobs are needed
2. Align total compensation with the business
3. Reward good workers with a combination of cash and praise as often as possible
4. Train workers who need improvement
5. Focus compensation program on the overall company objectives not on specific jobs
6. Make rewards immediate and based on close to weekly activity
7. Make employees part of the decision-making process
Incentive programs can be the source of legal hassle if not administered fairly. Here are some tips from experts on how to avoid potential legal problems:
- Employees should have a written copy of the plan and performance standards for their job
- Formal employee reviews, along with ways to appeal results, must be established
- All manager and employee decisions should be documented
- Have more than one person evaluate employees, if possible
- Any rating of an employee must be made on job-related aspects
- Thoroughly analyze the job before creating the performance standard
Note: This content is for informational purposes only. Achilles Group makes no warranties and bears no liability for use of this information. The information is not intended, and should not be construed, as legal, tax or investment advice, or a legal opinion. Always contact your legal, tax and/or financial advisors to help answer questions about your business’s specific situation or needs prior to taking any action based upon this information.
About Achilles Group: www.achillesgroup.com
Achilles Group is a strategic HR services firm that becomes the HR Director for small and mid-sized businesses, providing HR expertise that SMBs require at approximately 50% of the cost of internal resources.
Typical clients include executives looking for an alternative to building an HR department and companies outgrowing their current HR capabilities.
Achilles Group provides HR expertise in support of your business' goals for more than 12,000 client employees in over 30 states. Started in 2002, the company serves businesses with 20-2,000 employees.
