Total compensation refers to all the cash and non-cash benefits your employees receive in return for their hard work. Base salaries, overtime pay, and bonuses are all part of your employees’ compensation. Paid leave, like vacation days, sick days, and personal leave, are also included. Your group benefits plan—including medical, dental, and vision insurance—is a major part of your compensation package. Additional benefits, such as tuition assistance, paid training, or relocation packages may round out your company’s compensation offerings.
Effective management of total compensation allows you to spend your company’s compensation dollars in the right places to get the maximum results from your employees. Effective compensation management benefits your company, but it also benefits your employees.
Here are some ways that effective management of total compensation is good for everyone involved.
It Improves Employee Morale
Employees want to feel like they’re receiving fair pay and valuable benefits from their employers. No one wants to feel like they’re underpaid or underappreciated. When your total compensation is managed effectively, your employees will know they’re being well-rewarded for their hard work. This leads to improved morale in your workplace.
Ensure your company’s compensation is on par with other companies in the same industry and area. If the salaries or benefits you offer aren’t as good as what your competitors offer, your employees may feel underappreciated and lose morale. If your compensation is competitive, make sure your employees are aware of that fact. Distribute total compensation statements that break down every benefit, from salary to group benefits to sick days, that your employees are receiving.
There are very good reasons to be concerned about your employees’ morale. When your employees feel positive about their jobs, their productivity is higher, and that makes it easier for your company to meet its organizational objectives. Happy employees also miss less work, and since absenteeism can lead to lower revenue, this is an important benefit for your company.
It Attracts Top Employees
Your compensation package is a key part of your ability to attract top employees to your company. High performers with in-demand skills have a lot of options when it comes to finding jobs, so if you want them to work for your company, you need a competitive compensation package. This doesn’t necessarily mean high salaries since non-cash benefits are also valuable to employees.
When your total compensation package is well managed, you’ll be able to attract high-quality employees, rather than losing them to your competitors. Top employees are important for your business because they help to drive your company forward. They consistently exceed your expectations and go above and beyond to help the company succeed.
Top employees are also beneficial for the rest of your employees. Top employees tend to be good team players, so they fit in with their departments and get along well with their coworkers. High performers also take ownership of their work, so your other employees will never have to pick up their slack.
It Boosts Motivation
A good total compensation package motivates your employees to work harder. For example, a well-communicated bonus structure lets employees know that if they meet certain goals, they’ll receive extra compensation. When employees know their hard work will pay off, they’ll be more motivated to strive for success. On the other hand, when employees think their hard work will never be noticed or rewarded, they’ll lose motivation.
How does employee motivation benefit your company? Motivated employees are more productive. They produce more products, serve more customers, and get more done during their workdays. This efficiency makes your company more competitive, and it helps your company continue to grow.