Communicate With People About Employee Compensation

by on June 15, 2009 · 0 Comment POSTED IN: HR Info Center

Make sure Employees know how the Employee Compensation plan works

Communicating with people about employee compensation, in my opinion, is one of the most important things you can do. It doesn’t cost you anything. But you need to get your employees and managers on board about what you’re trying to do with your employee compensation program.

And you want to probably communicate the mantra “pay for performance”. It’s kind of like your own chant here because almost every organization I’ve ever talked to wants to be paid for performance, meaning vary employee compensation based on performance.

The only organizations that are not in pay for performance mode these days are generally organizations that have unions or they work for the government. In those cases, they use what’s called a step rate system which is primarily based on seniority.

So, how much do I really communicate? And that seems to be a big question. And you can probably overcommunicate and probably hurt yourself more than you help yourself, but you don’t want to undercommunicate too.

Talk to them about the compensation philosophy – the company’s philosophy in employee compensation. Every employee—assuming you’ve got salary ranges—has to know what their salary range is. It’s a positive thing and not a negative thing.

It shows them what kinds of pay opportunity they have within their own job, what the performance expectations are, what their rating is and how the employee compensation plan works, how the stock plan works.

And generally, if you can, you know, if you have a career progression kind of a situation, communicate that to people because they really do want to know that.

So the manager needs to know all that and probably more. They need to know maybe not just – they need to know the salary ranges for all their people for sure but they may need to know the entire salary structure, how the incentive plan works, stock program works, how to compensate new hires.

Promotional process. What happens when people are promoted? Do you only do promotions one time a year or do they occur whenever the need arises? And how do you process all this paperwork? You may have very specific compensation dates they should be aware of. We evaluate salary on this date for all employees. We do bonuses on these dates, stock on this date. Here is your role in each one of those areas.

And again, if you haven’t trained them on performance appraisal form and process, you should probably do that.

So the manager needs to know also very specific things about all their employees, things like their title or performance rating, salary range, history, incentive payment history, etc. for employee compensation to be effective. They need to know this in real time if possible.

Edited Remarks from “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Olivieri

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