Methods to Ensure Fair Compensation Practices in Your Business

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Table of contents

  • Be transparent about compensation decisions
  • Compare your compensation with industry standards
  • Use a payroll tool to ensure accurate calculation of compensation
  • Encourage open dialogue within the business
  • Know the link between performance and compensation
  • Offer a comprehensive benefits package
  • Make sure your employee training succeeds

Be transparent about compensation decisions

Develop a clear and well-defined compensation policy that outlines how you determine salaries, bonuses, and benefits. All employees should have easy access to this policy. Ensure that compensation decisions are well-documented and based on objective criteria such as experience, skills, performance, and market rates. This documentation should be available for employees to review upon request.

Establish salary bands or ranges for different positions based on factors such as job responsibilities and qualifications. This provides employees with a clear understanding of the salary range for their position.

Compare your compensation packages with industry standards to ensure that they’re competitive and attract and retain top talent. According to a 2023 survey published in Forbes magazine, 40% of businesses believe employees leave their jobs to find ones with better benefits. The same survey shows that 54% of US workers are satisfied with the benefits offered by their current employer.

Employees who are content with their benefits and pay are 13% more likely to keep working for their current employer in the near future.

Use a payroll tool to ensure accurate calculation of compensation

A dependable payroll service ensures accurate calculation and distribution of salaries, bonuses, and benefits. By eliminating errors in payroll processing, they help ensure that employees receive the correct compensation owed to them.

Encourage open dialogue within the business 

Employees should be able to speak openly with management about compensation and other work-related concerns. It would help to create channels for employees to voice their feedback and suggestions. A 2022 survey sheds light on what’s important for employees beyond satisfactory compensation: the option to work remotely (47%), to choose their work schedule (45%), to undergo healthcare screenings and risk assessments (42%), and to have mental health days (53%) and stress management techniques (40%).

Know the link between performance and compensation

Regular performance reviews can help employers assess employee performance and adjust compensation accordingly. Performance and compensation have been linked for decades, but this doesn’t mean employees are only motivated by money. In 2024, employers are becoming increasingly aware that financial compensation isn’t the only way to encourage development.

If money is the only incentive, employees may prioritize the wrong performance aspects. In an effort to meet a quota, they might cut corners on quality. They can lose sight of the overarching purpose if they are only focused on getting the work done. Loss of focus can lead to disengagement at the workplace over time.

Performance-based compensation can magnify bias. In fact, performance management has traditionally been subject to what’s known as the “halo” effect, where the employer evaluates performance solely based on a perceived positive or negative aspect. There is also the recency bias, where recent behavior patterns or trends overshadow past actions.

Offer a comprehensive benefits package

Consider offering a comprehensive benefits package and additional perks to enhance employee satisfaction and overall compensation value. According to 2023 Aflac data, 84% of organizations believe their benefits package attracts top talent, which is the highest percentage reported in history. 83% believe it has a positive impact on employees’ productivity, and 80% think their employees are extremely satisfied with the benefits they receive.

Yet, the same survey revealed that just 58% of employees reported high satisfaction levels. In fact, employee satisfaction with benefits was at a decade low, down from 64% the previous year.

Make sure your training succeeds

By offering training and educational opportunities, you will help employees enhance their skills and advance in their careers, potentially increasing business revenue and compensation. To create a successful training program, start by assessing the skill and knowledge gaps within the business. Determine what specific areas employees need training in to perform better.

Define clear and measurable goals for the training program depending on what you want employees to learn. The training materials and resources should align with the goals. This could include presentations, handouts, online modules, videos, or interactive activities.

Choose appropriate training methods based on the content and audience. This could include classroom-style training, on-the-job training, workshops, seminars, e-learning modules, or a combination.

Finally, ensure that your compensation practices comply with relevant labor laws and regulations to avoid legal issues or liabilities.