Becoming the Employer of Choice: Compensation Management, Understanding the Value of Time and Money
Written by: Socorro Gertmenian, PhD, MLS; Sherry Chen, HR Consultant
In our previous article, Addressing Effective Communication and Building a Culture of Trust, we discussed the value of transparent communication in building trust and a healthy work environment. Building on that foundation, this next installment shifts our focus to a critical component of becoming an employer of choice: Compensation Management. Understanding the intricate balance of time and money is essential for not only attracting but also retaining the best talent. Here, we explore how effective compensation strategies enhance your reputation as an “Employer of Choice.”
Compensation management is the management of salary, benefits, and incentives that are provided to staff. How HR and managers communicate about these key items can impact how staff interpret and receive them. There will always be those entitled staff who will want more, just as there are staff who are there solely for a paycheck. There are employees who share their salaries, comparing and gossiping, and potentially replacing facts with guesses. Additionally, depending on the company's practices, compensation may appear (or may actually be) non competitive, unfair, biased, or sexist, etc. There is no perfect way to control the narrative, but there are ways to reduce the noise and misinformation.
Treating staff differently across the organization, not providing means for a work life balance, and inconsistent advancement practices could result in staff feeling undervalued. A practice that creates discord among staff and leadership is when some employees in the same or similar roles are treated differently (e.g., based on favoritism) with regard to compensation and advancement. Often the focus is on salary alone, missing the opportunity to lift up other positive benefits the company offers (e.g., underestimating a hybrid work schedule that may enhance work-life balance may be worth a pay cut for one person; employee 401K matching plan may be worth more than salary alone). Another common practice is where companies lack thoughtful design of the career pathways with fair and well defined successive steps toward those pathways (e.g., handing out titles and promotions not based on merit, tenure, or contribution). Addressing these inconsistent practices is crucial for fostering a workplace where every employee feels fairly compensated with regards to their time and money.
An effective compensation management program will start with a fair and consistent pay structure. HR plays a critical role in mitigating these issues by establishing clear pay structures and ensuring transparency in compensation practices. Regular compensation reviews and audits by HR can help ensure fairness and equity across the organization. Regularly communicating about how pay and benefits are determined helps foster trust and minimize misinformation. Furthermore, conducting routine market analyses to benchmark salaries and benefits against competitors ensures that the company remains competitive.
Companies and staff alike underestimate the importance of good compensation packages and its impact on satisfaction and work-life balance. We understand that not every company can compete in all ways (e.g., salary, benefits, time off, incentives, etc.). The first step is knowing the competition: their pay ranges and compensation packages for similar positions. We guarantee that your employees are comparing as well. The grass often looks greener on the other side. Many companies assume staff only care about their salary and thus companies do not actively promote their non-salary compensation packages (which may include time off, flexible work schedule, incentives, retirement benefits, and health/ dental/ vision benefits). If a company is not able to offer the most competitive salary, it often feels reluctant to promote or discuss the hidden benefits of their compensation package. This may lead to staff turnover, quiet quitting, and poor work ethic (i.e., here for a paycheck mentality). A complete and thoughtful compensation package showcases that the company cares about their employees by offering a package that meets their needs. HR teams can address this by implementing a “Total Rewards” compensation package, which should include benefits such as flexible schedule, training, daycare assistance, in addition to the standard compensation items (e.g., health care insurance coverage and retirement plan). When feasible, the company may consider opportunities that enhance employee work satisfaction (e.g., food trucks on Employee Appreciation Day, taking all the administrative assistants out on Administrative Day, wear your team jersey day the Friday before the big game, casual Fridays once a month, etc.).
Although staff may still focus primarily on salary, these strategies involve educating employees on the full value of their compensation. For example, HR can create personalized Total Rewards Statements for employees, which outline the monetary and non-monetary value of their compensation packages. These annual statements are powerful tools to reinforce the company’s investment in its workforce. When employees see their leadership and HR teams work hard to educate them on their compensation packages, and seek feedback on what would improve their work experience, employees will more likely see that their company cares. In this way, they may learn that the grass is not always greener on the other side.
When HR leaders review the Total Rewards report with their employees during annual one-on-one meetings, it builds transparency and reinforces trust between staff and management. Training leadership on how to review the annual compensation summary with staff reinforces the company’s dedication to ensuring staff are well taken care of. It also equips managers with the tools to discuss compensation confidently and transparently. Additionally, the company is educating the staff, helping them become well informed on what to expect and demand should they ever plan on leaving to another company.
Companies have to consider the bottom line, reducing costs, and improving productivity. By investing in your employees the company gets a return on their investment when their staff turnover is low and staff productivity increases. To become an employer of choice, the company has to also look at what makes people want to stay and invest in the company. Staff are looking for work-life balance, hybrid or flexible schedules, benefits that support them and their family without undue burden, and a work environment that fosters growth and respect. One way HR can encourage retention is by conducting employee surveys to understand what benefits and incentives matter most to their workforce. These insights can guide the design of compensation packages that resonate with employees’ priorities, creating a stronger sense of loyalty and alignment with the organization’s values. Additionally, HR can establish feedback loops to ensure ongoing improvements in compensation practices, making employees feel heard and valued.
An employee's personal Total Rewards annual report may include various items that fosters a work culture that invests in the staff. This report can highlight benefits such as professional development opportunities and work-life balance initiatives. The exact items depend on the company’s resources. The report itemizes and provides a monetary value where possible. Transparent communication and education about their compensation package can enhance an employees’ understanding and appreciation of the company's total investment in them.
Salary
Health, vision, dental, pet, insurance packages
Flexible spending account
Child care
Cash incentives
Profit sharing
Retirement package / 401 K contributions/ matching
Stock Options
Tuition reimbursement
Flexible work schedule
Hybrid / remote work opportunities
Competitive paid time off
Training and training time
Leadership development
Employee Assistance Program
We want to leave you with a couple thoughts: create a program that you would choose for yourself and family; and be respectful of people’s time and money. Keeping these things in mind, will help develop a compensation management program that is well throughout and clearly communicated.