While we know ‘the great resignation’ has more to do with employee engagement and satisfaction than pay itself, knowing whether or not your compensation strategy stacks up against the rest of the market is a non-negotiable in today’s talent market.
Unsure if you’re paying equitable, competitive and on-market rates?
6 signs your compensation strategy may need a rethink
1. Increasing issues with absenteeism and poor employee performance.
Yes, we’re living through a global pandemic, but with most of us having settled into our “new normal”, employers should expect a certain standard of performance. A sudden or significant change in both of these things may signal the erosion of employee motivation as the result of the employees’ perception of low pay, limited opportunities for promotion or lack of recognition for a job well done.
2. Losing high performers to companies with significantly higher starting packages for similar jobs.
Attracting and retaining top talent are the main goals of an effective compensation strategy. If your top performers are leaving for significantly higher total compensation, that is a clear sign that it is time to review. Many leaders are shocked when their junior employees leave after 1-2 years at the job. If you aren’t paying your top employees competitively, no matter what level they are, you risk having them leave for a better paying opportunity.
3. Your process lacks a clear relationship between performance and pay for employees.
If your leaders and decision-makers find it hard to decipher the connection between individual performance and pay, employees will also. Just like the company has financial goals, it is important to recognize that employees do too. Transparency is important when it comes to compensation, and providing a clear guide for how employees can achieve their career & financial goals using performance-based incentives will make employees feel confident in their roles. Your compensation plan and performance management process should be explicitly linked.
4. Significant challenges with recruitment and retention.
While a pandemic job market can certainly be uncharted waters, if you’re having significant challenges recruiting the right individuals for roles, a market review of competitor compensation practices may be required to help determine if issues exist within your larger strategy.
5. Company-wide discrepancies in pay for similar job titles.
Pay disparity is something many companies are still actively trying to eliminate as they work towards pay equity for equivalent roles. There are so many factors at play here including geographical regions and years of experience, but leaving discrepancies unaddressed is dangerous for a number of reasons including corporate reputation, legal implications and loss of valuable human capital.
6. Negative feedback from employees and managers regarding the process.
Receiving actual feedback from employees is a clear sign that your company’s compensation strategy needs review. Helpful feedback is often captured in 360 reviews, stay and exit interviews, or in one-on-one meetings between managers and their team. Keep all feedback documented, and review periodically to determine whether patterns exist.
