The compensation discipline seeks to maximize competitive advantage by attracting and retaining the most qualified workers to an employer. Best practice in today’s workplace considers total compensation to include base salary, bonus or incentive plans, benefits, and non-cash compensation. A pay philosophy is a company’s commitment to how it values employees.
A consistent pay philosophy gives the company and the employee a frame of reference when discussing salary in a negotiation. This usually requires a competitive well-rounded pay philosophy, including benefits and work-life balance. Compensation philosophies reap little reward without the knowledge and alignment to the organization’s overall business strategy. Armed with the right information, compensation professionals can create a philosophy that will stimulate a more engaged workforce and lead to a higher-performing organization
A compensation system will price positions to market by using local, national and industry-specific survey data, will include survey data for more specialized positions and will address significant market differences due to geographical location. The system will evaluate external equity to the competitive market and internal equity which is the relative worth of each job when comparing the required level of job competencies, formal training, experience, responsibility, and accountability of one job to another. The system must be flexible enough to ensure that the company is able to recruit and retain a highly qualified workforce while providing the structure necessary to effectively manage the overall compensation program.
Organizations should establish and communicate clear pay policies. At a minimum, organizations need to ensure that their compensation policy adheres to employment legislation including:
Minimum wage
Overtime pay
Pay equity
Vacation pay
Holiday pay
Incentive pay
Tips and Gratuities
Pay method and pay frequency
Pay deductions
Payroll records tracking and reporting
Many organizations adopt transparency in compensation practices. Transparency involves compensation plans that are simple to understand, easy to implement and published internally to all employees. Many companies provide an annual Total Rewards Statement to each employee that outlines and explains all compensation elements included in their compensation package including cash and non-cash.
Bonus and incentive pay is tied to specific performance results against pre-set goals and objectives at the individual and organizational level. Results that are measured can be quantitative and qualitative. When establishing bonus schemes, organizations often apply a balanced scorecard approach: looking at financial, human resources and customer results.
A compensation model that encourages innovation should strike a balance between the risks and rewards associated with the work. Rewards programs can recognize innovation within all elements of a company and at all or the majority of employees. When only the top 10% of high performers are eligible for recognition and associated rewards, approximately 70% of employees who fall in the middle of the performance bell curve and who are consistent performers day after day, can become discouraged and disengaged. The goal should be to properly calibrate your awards approach to reach far more employees with recognition rewards, thereby creating a culture of innovation.
Compensation is a part of the complex HR processes, policies, and procedures. Top management has to decide, the primary role of compensation in the organization, whether it will be a supplementary role or a dominant role. The compensation philosophy is the foundation for all organizational compensation decisions.
Change can be challenging and demanding. At WageWatch our compensation consultants can assist with your organization’s compensation needs and help ensure your wages and salaries are supporting your company’s business strategy and objectives. In addition to our PeerMark Salary Survey for over 100 local lodging markets in the U.S. and Canada, we offer a National Benchmark Salary Survey. With over 9,000 hotels and 200 casinos in our database, WageWatch’s hotel and gaming salary surveys are the most comprehensive surveys available to Human Resource professionals. For more information on our services, including consulting, salary surveys, benefit surveys, and custom compensation reports, please call WageWatch at 888-330-9243 or contact us online.