Ten key points with compensation systems
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Ten key points with compensation systems

Non-monetary rewards can play a vital component in your compensation system

  1. Personalize your compensation system whenever possible.
    For example, you may give a dinner voucher to one employee who values it and maybe something else to another employee. So try to personalize it if you can.

  2. Provide variety.
    Considering – for example, if your employee has a family, make sure the reward can be shared by spouses or children.

  3. Ensure frequency in your compensation system.
    If you use it sparsely, it may only cause confusion. Tailor the size of the award to the effort. Make sure that whatever you ask them to do or they did, that the reward kind of reflects the effort being made. Don’t always do repetitive kinds of awards. You know, weekly lunch out on Friday kind of get old after a while and starts to lose value.


    1. Ensure the reward is fair and it’s not a substitute for unfair base salaries. Make sure that the non-monetary recognition reward doesn’t replace performance pay, okay?
    2. Communicate with employees about the details of your compensation system

It is especially true during difficult times. It’s one of the more important ways to ensure that your employees truly understand the value of their total compensation program. And if you don’t do a total compensation statement – and I know they’re expensive to develop, but if you can afford to do it, you might actually see some pretty good returns on the investment in doing that. Literally a total compensation statement will outline all – not only cash but non-cash items including benefits they’ll receive, how much the employee is – how much it’s worth to the employee, how much they get paid for certain programs and how much the company pays for these programs. It’s actually a pretty good tool to make sure the people understand the full value of their compensation package, which is literally in most cases about two times – the true total value is about two times the cash value.

  1. Educate your employees about the total compensation system.
    Salary is one thing or incentive is another thing but they also get other kinds of things in this relationship.

  2. Be open and honest about your compensation system.
    Hold frequent discussions about goals, results, priorities. Discuss the employees’ compensation positions and what their career paths. Again, people do want to talk about career paths. If you can develop career paths for employees, you are way better off than most companies these days.

  3. Take responsibility for the compensation system
    I think managers should also take some responsibility for any compensation decisions that are made throughout the year. You know, don’t just – I don’t think they should blame it on human resources or the company. They need to take some responsibility for it.

  4. Communicate seriously about the compensation system
    And if somebody asks to talk about salary, you always need to kind of take it seriously, but you should recognize. And I think your employees actually are big boys and girls, they recognize you can’t do everything for them when it comes to their compensation expectations. But good communications will go a long way to making people feel like they’re being treated fairly during the next year or so.

  5. Make sure your people have a wide knowledge base about the compensation system
    At a minimum everyone should also understand not only
    how their pay is determined but things like the company philosophy and compensation. There are salary ranges, I mean you’ve got salary range, your performance expectations, performance ratings, what their rating is and why you gave it to them of course, and how an incentive plan works if they’re eligible or stock program works if they’re eligible. And again, anything you could say about career progression. Where can they go from here? What are the skills required and how are we going to help them get the skills to move forward?


Edited remarks from the Rapid Learning Institute webinar: How to Set up Fair and Effective Pay Plans in an Uncertain Economy by Rick Olivieri

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