Five questions to ask about your pay programs
Your compensation programs represent the cornerstone of what you offer as an employer. So you want to get pay right – both in terms of plan design and administration – to ensure your programs deliver value.
Asking five questions about your organization’s approach to compensation can help you identify potential trouble spots before they create more serious challenges:
1) Do you have well-designed pay programs or are pay decisions largely discretionary?
- Relying too much on discretionary pay decisions can be a risky proposition.
- Thoughtfully designed compensation programs provide a framework for managing pay in a fair, consistent and market-competitive manner. And that’s essential to support effective talent strategies and to encourage employee motivation trust.
2) Are you paying enough to attract and retain the talent you need?
- In an era of modest pay increases, it’s easy to lose sight of how internal pay levels compare to competitive market practice.
- But it’s critical to conduct periodic reviews to assess how your people are paid relative to market, with respect to both salary and bonus. You should also examine whether your base pay program itself needs any tweaking.
3) Is your approach to incentive pay delivering value?
- Many companies pay out significant dollars in bonuses every year. But this may not be money well spent if the incentive plan isn’t well designed.
- A well-crafted plan will connect bonus payouts to a few key measures that align with business priorities. A solid plan also includes features to ensure payouts are affordable and defines what happens in the event of employment status changes.
4) Is your approach to compensation putting you at legal risk?
- Having a clear and defensible approach to making pay decisions is vital to ensure your organization stays on path with respect to employment legislation. It’s important to do periodic reviews to test for both internal equity and ongoing compliance.
- If your organization is covered by provincial or federal pay equity legislation, it’s also important to stay current with those regulatory requirements.
5) Do employees understand how your compensation programs work?
- While a solid design is vital if compensation programs are to deliver optimal value, how you communicate about pay is equally important.
- For pay programs to drive desired behaviours and results, employees need to understand what is expected of them – as well as how their contributions and results will be rewarded.
- Do employees understand what it takes to earn a salary increase? A bonus? Clear and consistent dialogue about performance expectations and links to pay are vital if you seek to foster a high-performing organization.
Talk to us about how to take your compensation programs to the next level. Contact Us