Compensation refers to what your business offers your employees in exchange for their hard work. Compensation includes the money you pay your employees, including base pay, overtime pay, and bonuses. It comprises your group insurance, which includes health and dental insurance. It also includes pension, group registered retirement savings plans (GRRSPs), and deferred profit sharing plans (DPSPs). Long-term disability insurance, tuition reimbursement, vacation days, sick days, daycare and even flexible work arrangements all fall under the umbrella of compensation.
When your business is very small, handling your employees’ compensation isn’t too hard. However, as your business grows, you need a strategy to handle compensation. The tactics that worked when you had five employees just don’t work as well when you have 20 to 500 employees. Growing businesses need to use compensation management to ensure they’re offering the right compensation to their employees.
Compensation management simply means that your business is strategically managing employees’ compensation. The goal of compensation management is to ensure that you’re spending your compensation dollars in the right areas and getting the maximum returns from your employees.
Compensation management includes things like offering pay that’s competitive for your local market and creating bonus structures that motivate your employees. It also includes offering a benefits package that will keep everyone—your company and your employees—happy. For a growing business, optimizing all of these areas of compensation can feel overwhelming, which is where platforms like JUNGO come in.
The Importance of Compensation Management
Since your company is growing, you want to be able to recruit new workers, and managing your compensation can help. A competitive compensation package can help draw talented workers to your company. On the other hand, if your compensation package isn’t well-designed, good employees may not want to join your company, and they may work for your competitors.
The right compensation also helps you retain your current employees. If your employees know that they’re being paid a below market rate, or that their hard work won’t be rewarded with an appropriate bonus, they’ll become unhappy and may quit. As you know, higher turnover means higher costs, so it’s important to hang on to your good employees. Managing your company’s compensation is a way to avoid the problems of low morale and high turnover.
Your company’s group insurance plan is a key part of your compensation. After salary, it’s the most important benefit for employees. Your insurance plan helps you stand out from your competitors and attract talented staff, so it needs to be welldesigned.
How to Manage Compensation
Very small businesses may use multiple spreadsheets to track and calculate different aspects of their employees’ compensation. This isn’t an efficient system, but when you only have a few employees, it may suit your needs. However, as your business grows and you hire more staff, your old spreadsheets just won’t do the job anymore.
Spreadsheets take a lot of time to update. For a growing workforce, they can become unmanageable. When employee data is spread between multiple sheets, finding and tracking information is time-consuming and you could misplace important data.
In some cases, the compensation data that gets misplaced can have serious, negative impacts on your business. For example, if your new employee is mistakenly not added to your benefits plan and then they become seriously injured, they won’t have any coverage. This is devastating for the affected employee and can damage morale for the rest of the team.
This is why businesses turn to compensation management software as they grow. With this software, all the information your HR department needs is in one place. Since the information is in one place, you can quickly and efficiently analyze your employees’ compensation and make any necessary changes.