Defining Key Compensation Management Objectives That Align With Business Goals

Compensation management is at the core of every organization aiming for success. It has a leading role in retaining staff and attracting the best talent on the market. The way we incentivize our workers today is shifting, as employee needs and preferences change. The Covid-19 lockdowns, for example, shone a new light on how hybrid and remote work can help us achieve work-life balance.

Whatever approach you take, every compensation strategy should have clearly defined key objectives. When you can effectively communicate pay decisions to employees in a transparent way, your team will understand how they align with your business goals.

Let’s explore five key compensation management objectives that every company should aim towards.

1. Encourage Retention Rates

You should provide salaries that allow your employees to comfortably pay their bills – but it goes beyond that, too. Rewarding good performance shows your employees that their careers have room for growth. It reassures them that they don’t need to look for work elsewhere as inflation rises. It’s also a great way to say thanks.

Rewards don’t have to come in the form of money, either. You can offer flexibility, career development opportunities, or extra leave. Have excellent health insurance, tuition reimbursements, retirement plans, and childcare support in your compensation packages.

Rather than spending time and money on new hires, look internally. Who is constantly putting in 110%? Is anyone taking on more responsibilities than asked of them? And finally, have you shown them that you noticed? Personalizing how you reward your employees will demonstrate that you value them and encourage retention rates.

2. Improve Employee Performance

Money, free goods, and more time are great incentives to work hard. If you want to drive performance, offering better compensation plans for top performers could do the trick. This is where performance reviews meet compensation management.

Conduct six-month reviews, ensuring all employees are on track to achieve their goals before their annual appraisal. Offer feedback and facilitate open communication to hear any concerns your team may have. Set reminders for anyone who is due for a bonus. Within budget, offer potential rewards for those who are demonstrating stand-out performance.

It’s important to use this time to explore what benefits are going used or unused. Ensure everyone knows how to utilize this aspect of their compensation package. Identify any gaps or areas for improvement and make adjustments to motivate your team’s performance.

3. Attract Top Talent

Another aspect of a strong compensation strategy is attracting the right people. Of course, every company wants talented workers, particularly those with skills that are in demand in their industry. If you want to see company growth, even if you have a robust existing team, you’ll need to hire for new skills.

So why will top talent choose you over another company? Alongside company culture and vision, your compensation package will be something they consider. Unfortunately, it isn’t always possible to compete in your industry if you’re limited in funds or don’t compare in size. A holistic compensation strategy including well-considered benefits can help you stand out where base salary doesn’t.

In fact, according to global HR company Remote, the current top ten most valued benefits are as follows:

1. Flexible work hours
2. Company-sponsored retirement plans
3. Friday early-leave
4. Four-day work weeks
5. Family health insurance
6. Private health insurance
7. Healthcare cost reimbursements
8. Paid self-care/mental health days
9. Miscarriage leave
10. Private dental insurance

Offering some of these could be what sets you apart from your competition and attracts talented candidates to apply for your vacant roles.

4. Achieve Pay Equity

A major objective of your compensation strategy should be achieving pay equity. As defined by Salary.com, this is equal pay for comparable jobs that is internally equitable, externally competitive, and transparently communicated.

There are still gaps in compensation in the job market where certain groups are being discriminated against and not paid what they deserve. Remaining competitive requires making a conscious effort to avoid this in your company. Consider diversity, equity, and inclusion (DEI) in your team. You want to create a work environment that makes employees feel understood and valued.

Regularly review your compensation management and internal pay trends. Identify and address any red flags that could (intentionally or unintentionally) translate to discrimination. Besides doing this for moral reasons, it will help avoid any legal complications around pay equity.

5. Strengthen Company Branding

The final key objective we suggest concerns company branding. Offering competitive and holistic compensation will leave a lasting impression on your employees. Digital networking allows job seekers to research and exchange information about companies easily. Creating a supportive and encouraging work environment will solidify your reputation.

This should also encourage you to welcome employee feedback so you’re constantly making improvements. When your compensation management considers living costs, inflation, and pay equity, you’re ticking important boxes. Ensure that your employees have good things to say about how their performance is acknowledged and rewarded to help your company branding stand out in the market.

Take Home Message

When you can retain dedicated employees, improve performance rates, attract skilled new hires, achieve pay equity, and strengthen your company branding, you can ensure that your compensation strategy is aligned with achieving business goals.

A strong team that’s incentivized to work towards achieving the best results as an organization is worth the effort required to create a strong compensation management. Define your key compensation objectives, work hard to achieve them, and see your business thrive.