Without a good pay and benefits structure, you cannot attract and retain the best employees. However, devising a compensation strategy is tougher than it looks — many factors go into paying competitively without breaking the bank. One such factor is your compensation philosophy.
Considering your peers
A good way to start is to consider the practices of your peers. This does not mean you have to copy them. You simply need to decide whether you want to distinguish yourself as an employer by paying higher-than-average salaries or by paying salaries that are merely marketplace competitive and finding other ways to attract and retain top performers.
Deploying signing bonuses
Another option is to use compensation to attract employees but other means to retain them. Few small to midsize businesses can afford to draw, motivate, and retain through lavish compensation.
One idea is to pay a little more upfront with signing bonuses that help you to get the best and brightest in the door. Once they are in, you can help keep them by using less expensive strategies, such as allowing flexible hours after a set period of service, creating a pleasant working environment, and providing praise and advancement opportunities.
Minding your budget
Try to foster a compensation philosophy that acknowledges your objectives without bringing on a huge financial strain. For example, your rationale might be to pay a base salary that is a little lower than industry peers offer but provide opportunities for substantial bonuses for strong performance. Alternatively, you may wish to offer equity to everyone, so that each employee can share in your company’s success.
Getting a second opinion
It is not uncommon for a company’s ownership and management to spend many hours debating the ideal compensation philosophy. If you are interested in a second opinion, please give us a call. We can review your financial statements and help you develop a philosophy that fits the size and goals of your business.