As an employer, doesn’t it get tough to manage your employee payroll? And if you mess up, the consequences can be quite dire. As featured in an article from Forbes, a Jobvite Job Seeker Insights survey found that 19% of the respondents said compensation is one of the reasons why people transfer jobs. Since your employees definitely won’t work for free or settle for meager earnings, it’s up to you to get your company compensation plans together. In this article, you will learn more about them, why it is important, and how to create effective compensation plans for your employees.
When you talk about a compensation plan, you refer to a broad financial term that includes the salaries, bonuses, benefits, and incentives that employees receive. This can be on a monthly or productivity basis. It is crucial for companies to design a good compensation program because employees are often sensitive about this. To create the right compensation package, companies must also develop an effective strategy. The benefits of implementing an effective compensation plan include more engaged workers, better employer branding for you, and lower chances of your employees jumping ship to other companies.
As noted above, an effective compensation plan can lead to better engagement, which is just one reason why this is so significant. Greater job satisfaction will, in turn, see a company develop employees that are more loyal to them, as well as employees with boosted productivity. Highly effective compensation plans won’t just benefit those who are presently working either. When employers tout that, prospective applicants can’t help but be attracted to the company.
Straight salary is the normal wage given to an average employee. The salary is based on the employee’s job title and work description. In this arrangement, the company decides whether or not to raise the employee’s salary base on his or her work performance.
This type of compensation plan is for employees who work in a team-based company. The management determines the compensation given to the employees by evaluating the territorial volume each respective group made.
This type of compensation plan is when an employee will receive an additional bonus if his or her work productivity exceeds the goals set by the company.
This type of compensation plan is a method for sales employees. For every sales transaction they make, they will receive a percentage from it. However, it depends on the company on how much commission the employee will receive for each transaction. One specific example is the Monat compensation plan. The way the company designed this allows an employee to join them as one of their affiliate partners. As they move up the ranks and participate in affiliate commissions, their plan allows individuals to earn far more than their initial pay.
There are many templates for compensation plan examples available online. If you want to create your own plan, below are the steps in creating a good compensation plan for your employees.
When gathering information for your compensation plan, it is essential to start with your employees. List down the positions and their respective job descriptions. Afterward, think thoroughly about which compensation plan would best suit your company. It would also help to weigh the responsibilities of each employee to determine which compensation you should offer to each of them.
You need to keep up with the latest market rates since most of the companies are giving a competitive salary to their employees. Research on what is the appropriate salary for a specific job position, and strategize how your salary rate will stand out compared to other companies.
Incentives also boost an employee’s work performance. You can offer gift cards or movie tickets to employees who don’t have any record of tardiness or whose productivity is constantly increasing. These little gifts create a positive impact on your employees’ morale since their achievements are being valued.
It is important to offer great benefits to your employees. These benefits will motivate them to work hard and be productive. Most companies offer health, dental, life, and leave benefits because these are mostly what a potential employee would favor.
You must plan the budget for the compensation that you want to offer. It is important to have a detailed budget plan for the compensation that you will provide for every employee. Doing so avoids budget shortage and guarantees employers that every employee will be covered by the compensation. It also helps in choosing the best compensation that befits your budget.
The executive compensation plan is a structured financial award given to a senior executive to achieve company goals. It is purely based on the performance of the executive. If it fails, then the incentives won’t be given. On the other hand, if an executive is successful in achieving the company’s goals, then the incentive will be given along with additional awards.
A deferred compensation plan is when a company or a business withholds a small percentage of an employee’s salary until a certain date. This is usually for future instances such as retirement programs and pensions. There’s also a variation of it called the 457 deferred sales compensation plan. That particular employee compensation plan further supplements an employee’s retirement pension while also providing the added benefit of beneficiaries receiving assets upon the employee’s death.
A few examples of compensation packages are retirement package, incentive and benefits package, and health and life insurance package. Besides these common examples, there are also specific ones offered by certain companies. One would be the doTERRA compensation plan package, which allows their employees to earn a high percentage even when they are still on the company’s lower levels, along with other benefits.
Compensation plans help manage the salaries and benefits of your employees. If you have offered good compensation plans to your employees, then you don’t have to worry about them transferring to another company for great benefits. Whether you are trying to improve your system regarding monthly salaries or a 401k plan, we guarantee that the information you get out of this article will help you create something effective and long-lasting. Stop hesitating and download a template today!