Compensation strategy is an important component of your company's overall hiring strategy. You already understand that compensation is very important to be able to hire and retain top talent. What you might not know is that there are some simple strategies you can use to increase the value of your compensation without increasing base salaries. In today's post I'll explore how to understand your total compensation package and offer six unique strategies to increase the value of your total compensation offered.
Understanding Total Compensation
When considering making changes to your compensation strategy, it's important to first between base salary and total compensation.
Base salary is the amount per hour or year an employee is paid. This is the figure that appears on the employee's paycheck. This number does not include bonuses, benefits, or any other perks.
Total compensation is everything that an employee receives in exchange for working for your company. This figure includes base salary, bonuses, incentives, benefits, on-site amenities, and any other perks you offer.
Some typical benefits induced in total compensation:
- Health insurance
- Vision and dental insurance plans
- Retirement plans
- Performance bonuses
There are many creative ways that companies add additional value to their total compensation package. Here are just a few:
- Gym memberships
- On-site child care
- Casual dress code
- Flexible schedules
Creating Goals for Your Compensation Strategy
When you're considering making changes to your company's compensations strategy, there's a couple of key things to keep in mind:
- First and foremost, employees must feel they're being compensated fairly. If employees don't feel this way, high turnover is inevitable.
- Your compensation strategy should ensure employees are invested in the long-term success of the company.
- Communicating your company's benefits and perks programs to employees will help them better understand the value of their total compensation package.
When creating your total compensation package you should set one or two goals. This helps make sure that as you add incentives to the package, they're in-line with your overall compensation goals. Here are some examples of goals related to total compensation:
- Recruit great talent
- Motivate employees
- Reward top-performers
- Reduce employee turnover
- Improve your career brand
Six Creative Compensation Tactics
Now that you understand total compensation and have set some goals for your compensation strategy, you can get to work building your total compensation package. Here are six unique compensation tactics you might opt to include:
1. Delayed signing bonuses
Many companies offer a large signing bonus as a particularly enticing component of the compensation package. However, a highly-effective yet often-overlooked compensation strategy is to offer a deferred bonus. For example, offer a $5,000 signing bonus up front with an additional $5,000 bonus granted at the six-month mark. This way the signing bonus works not only as a compensation tool but also as an employee retention tool.
2. Think Beyond Cash Incentives
Rather than offering a performance-based cash incentive, consider offering a different incentive such as an annual company trip. Other great ideas for incentives include: bonus vacation time, sports-related activities such as group outings to a game, or free catered lunch. Any of these incentives can add variety to total compensation and provide tangible incentives for employees to work towards.
3. Employee Stock Ownership Programs (ESOPs)
In an employee stock ownership program you offer employees stock in the company as a benefit or performance-based bonus. This program helps align an employee with the long-term company vision, as they become personally invested in the company's growth.
4. Phantom Equity
Unlike ESOPs, phantom equity does not transfer any of your company ownership to employees. Rather, it's a contractual agreement which gives your employees a right to a certain percentage of the profits/proceeds of your company. This process allows you to incentivize long-term commitment and high performance without giving up any ownership of the company.
5. Employee Discount Program
An employee discount program is a great way to provide additional incentives beyond an employee's base salary. Employee discount providers will partner with your organization to offer your employees competitive discounts on retail goods, phone bills, hotels, and much more. Studies show that Millennials, who are often on a tight budget, are particularly enticed by attractive employee discount programs.
6. Paid Training Stipend
Including a training stipend in an employee's compensation package accomplishes three things:
- Shows your employees that you want to invest in them and their career success. According to , most loyal employees believe their company offers a lot of training and support.
- Develops your employees, so they can perform their job more effectively and become strong leaders.
- Increases the total compensation value of your employee benefit package.
Here are some key take-aways from today's post:
- When thinking about compensation, you must consider the total value of your compensation package, not just the employee's base salary.
- When discussing compensation strategy, it's important to have clear goals in mind.
- A competitive compensation strategy will help your company attract, develop, and retain the best talent.
- Continuous communication around the total compensation package is key.