By Karin Colucci, Vice President of Human Resources and Benefits, IdilusHR
Employee retention continues to be a top priority for business owners nationwide. In fact, 63 percent of the more than 5,500 employers surveyed by job-data firm PayScale Inc. reported employee retention as their “top concern” in 2014. Furthermore, 22 percent of employers reported an inability to offer a competitive wage as a barrier to finding talent, and nearly 80 percent were only “somewhat” or “not at all” satisfied with their compensation structures.
These employers are right to prioritize compensation as a retention tool. According to the Society for Human Resource Management’s (SHRM) 2015 Employee Job Satisfaction and Engagement survey, compensation was among the top five areas ranked “most important” by employees, along with benefits, job security, trust between employees and senior level management, and respectful treatment of employees.
That same survey, however, showed that employee job satisfaction is on the rise: 86 percent of U.S. employees reported overall satisfaction with their job in 2014, up five percentage points from 2013. As the labor force continues to change, with different demographics and younger generations presenting new challenges for employers, business owners must fine-tune their compensation strategy to ensure optimal employee satisfaction and engagement.
Define a clear compensation policy
Managing employees’ expectations is vital to ensuring a productive and satisfied workforce. Business owners must have a well-defined, straightforward policy regarding employee compensation and clearly identify the parameters around salary increases and bonuses. For example, how often should employees expect a raise? Are salary increases primarily based on employees’ tenure at the company, or is their productivity a key factor as well? How large of a salary bump or bonus can they expect on average?
Once these basic details are determined, the company’s compensation policy should be shared immediately with current employees, new hires and even candidates. Open and transparent communication regarding compensation is key. According to the same PayScale survey, 63 percent of employers cited “retaining top employees” as their primary compensation objective. However, 57 percent did not train managers to discuss compensation with employees, and 38 percent were not very confident in their managers’ ability to do so. This lack of transparency creates an environment in which employees may feel forgotten, unhappy or unsure of whether they deserve an increase in compensation.
It is never too early to set and manage employee expectations to avoid future dissatisfaction and disappointment.
Conduct a compensation analysis
An effective compensation analysis begins with an accurate and detailed job description. And keep in mind, similar sounding titles may have entirely different responsibilities, depending on the company and industry.
Once employers have a comprehensive understanding of the responsibilities and requirements of the role, they can develop an appropriate salary range by consulting national benchmarking data. By comparing salary ranges by industry, geographic location and candidate experience, employers can gain critical insights from national data regarding a reasonable salary range.
Create a performance review program
Similar to the compensation policy, a performance review program is essential for business owners and their workforce to share expectations regarding job performance and subsequent financial rewards. Employers should begin by determining employee review frequency; while many businesses conduct annual reviews, others may prefer quarterly reviews or more informal check-ins after large projects.
Next, employers should set the parameters around positive performance within the company. This can include company-wide goals as well as job-specific skills and responsibilities employees can work toward individually. If they meet these criteria, employees should receive a previously decided upon bonus or pay raise at their next performance review. One additional aspect of the program is peer feedback; some managers now use feedback and reviews from peers to better understand employees’ day-to-day behavior and performance in the workplace. A comprehensive review program helps employees understand what is expected of them and what financial award they can expect to receive, should they achieve the previously outlined goals.
Employee retention has become a critical issue for employers across the United States and nearly all industries. By defining a clear compensation policy, conducting a compensation analysis and creating a performance review program, business owners can better motivate employees and create a more productive and engaged workforce.
To learn more about compensation-related retention strategies, please contact IdilusHR.