Small business owners need to carefully manage their spending to ensure they get the most value for their money. Employee compensation is no exception. Business owners need to ensure they’re spending their compensation dollars in the right places to get the most value out of their employees.
Here are some ways to maximize your return on employee compensation.
Provide Clear Benefit Information
Do your employees know what benefits you’re offering them, in addition to their base salaries? If not, you could have the best benefits package in the world and it wouldn’t matter. Your employees need to be aware of their compensation package to feel rewarded. Paying for compensation that no one knows about is a waste of your money, so make sure to advertise your compensation.
When you hire new employees, give them printed lists of all the benefits they’ll be receiving from your company. This can include details about your group benefits plan, your stock options, your bonus structure, and any other compensation your company offers. Benefits that are hard to assign a monetary value to, like the option to have a flexible schedule, should also be mentioned.
Encourage your employees to use the various benefits you’re providing. For example, if your health benefits expire at the end of each year, remind your employees to make appointments with their dentists or optometrists. This year-round benefits communication can pay off in a big way for your company since 39 percent of employees say being well-informed about their benefits would make them less likely to leave their jobs.
Know the Market Rate
Employees want to feel like they’re being paid a fair rate for their work. If they’re being paid less than their counterparts at other companies in your industry, they won’t feel valued, and they may leave for jobs with your competitors. Turnover costs you money, so this needs to be avoided. On the other hand, if your salaries are above the market rate, you may be overpaying your employees and not getting much in return.
When you set salaries for your company, make sure to study what other companies in your industry and local area are paying. Take non-cash compensation, like group benefits, into account as well. With this information, you can find the right balance between underpaying and overpaying your employees.
Reward High Performers
Are you giving equal raises and bonuses to all of your employees? While you may want to be fair, giving automatic incentive pay tells your employees that extra pay is something they can expect, not something they should work towards. If your employees think the extra money is a guarantee, there’s no reason for them to improve their performance, and you won’t be getting any extra value from your money.
To ensure your bonus dollars are well spent, reserve them for high performers who’ve earned the reward. Be transparent about what employees need to do to earn a raise or a bonus. If employees meet their goals and receive incentive pay, it’s win-win for them and your company. They get extra money for their hard work, and you maximize the value of your dollars.
Offer Benefits That Employees Value
Not all employees are interested in the same employee compensation, and if you’re spending money on a benefits program that nobody wants, you’ll be wasting your money. This is why it’s important to offer benefits candidates and employees value.
To find out what benefits will make your employees happiest—and give you thebiggest return on investment—conduct surveys. Use the results of these surveys to determine the best compensation structure for your company. For example, if your company is located in a very expensive city, you may get the best return on investment from offering a housing subsidy. A company with an aging workforce may get the best return from a good retirement and group benefits plan.