Pay Me What I’m Worth

By Samaria Jones 

Competitive pay is the most recognizable part of a company’s compensation and benefits package, and is key to gaining and maintaining marketplace advantage. Some of the first tools used to gain that advantage are market salary reports, which are used to determine the going market pay rate in similar companies and industries.

When trying to keep up with market salary reports and the going market rates, small to medium-size businesses are sometimes at a disadvantage. The uniqueness of job roles within smaller companies can make it difficult to compare job responsibilities in the market and obtain suitable salary comparison data. A company’s degree of competitiveness and ability to pay what the market bears can be another challenge. Yet, the going market rate must be considered in an effort to achieve and maintain external equity. Employers concerned with retaining top talent must consider the compensation practices of other companies in their industry as a tool for reducing turnover and recruiting costs. In a business where employees believe they can receive better pay for performing the same work, they have little incentive to stay with an employer; therefore, companies must be concerned with external equity.

Factors within a company must also be taken into consideration when addressing compensation issues. Internal equity seeks to place the same value on jobs that are similar in nature, responsibility and requirements. Jobs requiring greater skills or more responsibility are seen as more valuable than lower-skilled jobs. But remember, how your employees view their compensation is just as important as the compensation package itself. The potential exists for pay programs to be misunderstood or characterized as unfair, subjective or downright unlawful. In some cases, there may be merit to those perceptions.

Overall, a pay program should be SMART:

S = Strategically based 

You want the compensation plan to look at your company’s goals and take its future business direction into account when designing a pay structure, while rewarding and recognizing employee performance.

In designing a compensation plan, you should look at the market and monitor what the market is doing to regularly attract and retain the best.

Analyze not only the market, but also the jobs your employees are doing, and the jobs your employees will be expected to do in the future to maintain that competitive edge.

Reward results and recognize potential. Most employers want to give incentives to encourage employees toward an expected end rather than fully paying out dividends based solely on potential. Integrating rewards with recognition strategies allows you to encourage employees to exceed performance expectations.

You don’t want a compensation plan that is totally out of line with what the business environment looks like today. Your plan should resemble the times. Therefore, your practices and reward elements should constantly change with the times.

In building your compensation program, remember, the objective is to create a compensation program that will:

• Attract and retain top talent
• Motivate employees to achieve and maintain high performance
• Ensure competitive and consistent pay practices
• Comply with applicable federal and state laws and regulations
• Operate within the constraints of your budget and financial resources
• Ensure administrative efficiency; and
• Allow you to offer competitive salaries relative to the labor market

Smartly integrated compensation plans take into account what is necessary for your company to maintain its competitive edge today and its sustained growth tomorrow. When compensation dollars are limited, including a good balance of benefits, recognitions and reward can create a more appealing offering, and help you attract and retain top talent.

Competitive pay is the most recognizable part of a company’s compensation and benefits package, and is key to gaining and maintaining marketplace advantage.