One of the most complicated areas of the Human Capital Management (HCM) sector is compensation management. Many ad-hoc HCM solutions lack flexibility and overcomplicate systems. As a result, businesses must choose between constructing their own compensation management system, continuing to use Excel with all of its limits and risks, or using a web-based (SaaS) best-of-breed solution. Labor costs account for the bulk of most business expenditures. In fact, they can account for up to 70% of a company’s expenses. While there is no one perfect compensation system, with these 5 tips you can ensure your compensation system that best suits your organization and benefits investors and employees alike.
1. Refine Your Compensation System Regularly
We all saw how rapidly the markets changed in 2020 and beyond. To survive and grow over the coming years successful organizations must be flexible and adapt to changing market conditions. Examine the wage scale at your organization to discover how many workers are on the high end, low end, or in the center. Protocols for adjustment and review should be devised. When will salary changes and review processes be implemented? When performing pay audits, keep in mind the compensation patterns in your industry.
2. Ensure your Compensation System is Compliant
When designing a compensation plan, it’s necessary to keep legal enforcement in mind. Do you know what the local and national payroll laws and regulations are? When you build your compensation package, your HR compensation department will advise you on any legal considerations. By avoiding expensive penalties, more funds will stay in the company and out of the hands of governing bodies.
3. Ditch the Spreadsheet
Using spreadsheets to manage your company’s compensation is risky. It’s not a question of if, but when, the system will fail you and cost your company a staggering amount of time and money in a data breach. A hacker can get through your weak password system or intercept an email in a phishing attack and take all of your sensitive employee compensation information. We recommend using a trusted managed security services company to ensure your systems are well fortified.
4. Be Creative
A benefits package for employees will be part of your complete compensation plan. Today, benefits and perquisites account for a decreasing and decreasing fraction of total salary for CEOs. The degree of shareholder dissatisfaction much exceeds the value of the benefits/perks provided. According to recent surveys, most executives would rather have more time and flexibility than a larger salary. Today’s rewards are often supportive of executives’ well-being and efficiency. Consider including the following benefits as part of your compensation system:
- Stock options/equity
- Fully covered healthcare
- Matching 401k
- Maternity/paternity leave
- Transit reimbursement
- Work from home
- Unlimited PTO
- Child care reimbursement
- Learning seminars
- Wellness benefits
5. Automate Complex Processes
With the advancement of technology there is no reason your firm should be performing compex compensation planning and tasks by hand. Employees will be able to propel their departments forward thanks to the increased man-hours obtained via automation. When less time is spent maintaining spreadsheets and internal systems, productivity soars. When you automate, you’re more likely to modernize other elements of performance management as well, which is simpler when you’re familiar with technology.
Final Thoughts On Compensation Systems
Creating the perfect compensation system for your organization is an ongoing process with many factors to consider. There are hundreds of factors that can impact your compensation system and many performance measures to assess when establishing an effective compensation plan. An effective executive compensation strategy is the difference between long term success and lagging underperformance. Power your compensation planning, administration, and management with a secure, web-based centralized platform designed specifically for compensation professionals.Originally posted at: https://gethppy.com/workplace-happiness/5-ways-to-create-the-perfect-compensation-system