Wajiha Kashan (Founder Affordable.pk)
Transformation in business plans and policies have encouraged me to share my perspectives regarding the importance of Compensation Philosophy that purposefully benefits both employees and the specific organization.
From time-to-time, we are practicing different approaches to stabilize institutions that are currently grounded in the market. One of the common factors that must be discussed frequently is initiating a plan based on your company compensation philosophy.
Before starting a discussion, I would like to put my thoughts on the “Equal Pay & Incentives concept”.
Explore What Compensation Philosophy Means
A compensation philosophy is simply a formal statement documenting the company's position about employee compensation. It explains the "why" behind employee pay and creates a framework for consistency. Employers use their compensation philosophy to attract, retain, and motivate employees.
This philosophy has a lot to do with the Human Resources department that collaborates with executive admin to set reforms and policies. Mainly, compensation philosophy depends on two factors: Firstly, it may change according to the current circumstances of the company being affected by certain reasons, and second, on the basis of employees’ expertise.
Four Objectives To Follow Before Making Compensation Philosophy
To achieve your business objectives in a productive way, it is essential to remember implementing these following methods before forming a compensation philosophy.
Evolve Your Market Presence
Due to fierce competition, it is challenging to mark your footsteps towards success. Jot down the multiple factors about your company like location, growth rate, company capacity, and knowing your competitors. Start working on one of these areas where your expertise lies and then brainstorm about forming a compensation philosophy.
Improvement In Employee Value
Incentives and support for your employees are the two main reasons that will heighten your company’s growth. Practice bringing a different work culture in which your employees feel easy to work. Keep a balance between the incentives of the company and employees to ensure a better productivity rate.
According to the human psyche, it is beneficial to use approaches like honoring talents and appreciating skills to maximize the results. Set rewards for those who showcase extra effort in handling responsibilities and let others get motivated through this approach. Moreover, initiate growth opportunities for the employees to increase reliability between your company and employee. Either pick the rapid growth option or go with long term rewarding methods.
While interviewing the employees, it is important to check their responses and reviews regarding priorities. Reform your policies based on the stats that you gather while recruiting. For instance, put a thought on their decision-making skills about salary demand or long-term growth opportunities.
Components of Compensation Philosophy
After establishing objectives for your compensation philosophy, it is important to study components too. It will help you to be clear towards your company goals and would attract more employees.
Monetary compensation is a broader concept in which the money amount is paid to the employees in return for their service. Suppose your friend is working as a content writer at a fixed salary but can’t meet up with her necessities fully. To handle her monthly expenses, she will provide her services on an hourly basis to earn an extra amount.
In this regard, this would help her to earn her fixed salary and hourly wage at the same time. Moreover, she can also get the commission of certain tasks like attracting clients towards the company's business.
Other than that, indirect compensation, saving plans, annuity, and stock purchase options can be offered to provide benefits to the employees.
In comparison to monetary compensation, non-monetary compensation holds great importance in order to motivate the working values. It is paid in the non-cash form to increase the morale of employees and to appreciate their talents. Simply you can relate it with this example to understand this concept briefly. Imagine your boss is not offering any extra amount on your paycheck for being the employee of the year but suddenly grants you a family trip. Isn’t it fascinating? Still, you will feel to achieve something big.
Moreover, this domain takes care of your pension, insurance, company on-site and off-site events, free food, vacations, leaves, and much more. Even though this approach, you can make your clients happy and satisfied. Most of the employees expect to get conveyance and fuel expenses from the company. This approach can also be expanded on further benefits, depending upon the condition of a company.
To Sum Up
Development is possible when you set accurate rules and policies that not only benefit your company but also be in favor of your employees. Before recruiting, it is important to take care of such approaches that must be implemented at the right time and in the right place. A compensation philosophy is good to process because your company's growth relies on it.