Five Compensation Trends Impacting Your Business

While compensation planning has traditionally been approached as an annual process within companies, large, midsized, and small, there has become a heightened focus on approaching compensation planning on a more frequent basis and with greater strategic emphasis. This is in response to an increasingly competitive business landscape and competitive labor market where companies are competing to recruit and retain top quality talent.

With these increasingly competitive dynamics at play, business owners, human resources professionals and organizational leaders alike are staying abreast of business, economic and labor market trends, as well as changes impacting recruitment and retention of top quality employees.

A viable compensation plan requires year round planning and should complement your organization’s goals and objectives towards achieving long term sustainable growth. When conducting compensation planning for your business, consider the following five key components. 

1.      Industry & Company Growth:

Growing businesses within growing industries are becoming hard pressed to sustain continued growth through the recruitment and retention of top quality talent, and a competitive compensation plan in place aims to address this. Accordingly, industry growth and business growth will continue to play an important driver in compensation planning efforts.

2.      Total Compensation:

In response to cost increases in fringe benefits and related costs, proper positioning and communication of these non-cash components of compensation is paramount in broadening employee perspective on their individual total compensation package. Total compensation includes not just the cash portion of pay, but also the non-cash component, which is commonly the employer’s portion of health insurance costs voluntarily paid for by the company.

3.      Alignment:

Connecting compensation programs with business goals is key to driving optimal employee performance levels. As an example, for sales driven positions are generally compensated with a stronger emphasis on variable compensation in the form of commission, incentive, bonus, rather than solely on base salary. As sales increase, so does one’s commission, incentive, or bonus earnings potential.

4.      Market Comparison:

Measuring your company’s compensation program against local, regional and national market compensation trends offers insight into how your company’s compensation program compares with other companies in same or similar industries, and for same or similar job functions.

 

5.      Performance & Results:

For businesses to successfully compete for talent and for profits, tying pay to performance results is pivotal in compensation planning. As such, companies are adopting compensation programs that reward employee performance on the basis of employee, team and company results.

Kandor Group, Inc.