How Compensation Strategy Can Determine Business Growth?

Whenever you are looking to hire and attract a new employee, it is crucial that one looks at the compensation strategy and employee benefits. With the constantly evolving labour market and changing requirements and demands of the job seeker it is becoming challenging for the companies to align with the components of the total compensation package. However, all these payroll related problems can be solved easily with SkizzleHR, a leading HCM solution in the human resource technology industry. Its payroll module offers pay slips templates that can be customized according to specific needs of the role, industry and company. The module intends to remove the headache for HRs to roll out new compensation.

What are the Components of a Compensation Strategy?

Having an effective compensation strategy motivates current employees and is used as a tool to attract new ones. Generally compensation is understood to be only restricted to salary, however; components of a compensation strategy must include every aspect of employee benefits. The HRs must understand they need to include the cost of health benefits, retirement benefits, bonuses, total reimbursement, and any other non-salary benefit. 

According to Mercer, 70 percent of employees intend to enhance their benefits and compensation strategies in 2023. Organizations that offer comprehensive compensation package have a easier time recruiting new talents. Similarly, it has been observed that employees compete for a top spot if they realize that the benefits at the level higher are more. Therefore, it is crucial for companies that don’t provide comprehensive compensation to its employees often struggle to receive even a single application. Thus, companies must impress employees not just with high salaries, rather, it should be more offer comprehensive and thoughtful plan that defines companies compensation and why each component matters to your company and your employees. 

What is a Total Compensation Package?

A total compensation package includes more components than regular salary and wages. Total compensation package must consist of cash and also types of compensation, such as paid vacation, profit sharing, and more. 

Besides, companies that can provide a clear picture of their total compensation package from the onset through the digital offers can upsurge the number of job applicants. Thus it is crucial to have an effective compensation strategy. In this blog, we will explore the seven key components of the strategy.

Deconstructing the Components of an Integral Compensation Strategy

Let’s have a look at each of the component that forms an integral part of the compensation strategy:

1.Base Salary is the First Stage

Understably, the base salary is the fundamental component of an employee’s compensation. The fixed amount is regularly paid to the employee at the end of the month. However, the part that is significant is setting a competitive base salary to attract new talent and retain experienced workforce. To grapple with the problem of offering a competitive salary, companies can conduct salary surveys and benchmark against the industry standards to ensure their base salaries. 

2.Variable Pay to Increase Flexibility

Variable pay includes incentives, bonuses, commissions, and more to reward employees for their performance, contribution within an organization. Of course, it doesn’t mean you have to compensate more than your company can sustain. It is always better to build a sustainable and flexible compensation by including different kinds of indirect compensation. This way firms won’t have to pay higher money to employees and still keep them motivated with bonus, stock market share, and other incentives. A well structured variable pay program motivates employees to attain their personal and professional goal and align it with the company’s objectives. 

3.Benefits and Perks That Matter to Employees

Employee benefits and perks are a fundamental part of the compensation package. These can include provident funds (PF), employee state insurance (ESI), health insurance, and retirement plans. Moreover, various other allowances, such as rent allowances (HRA), conveyance allowance, and meal allowances can help employees manage their financial needs more efficiently. Offering comprehensive benefits to employees can significantly enhance overall compensation strategy. 

4.Allowances to Tailor Compensation Strategy

It is always beneficial for companies to often include special allowances in their compensation strategy. The house rent allowances (HRA) is widely used to provide employees with a tax-efficient way to cover their housing costs. Other allowances, such as travelling allowances can be tailored to employees’ needs and help them reduce their taxable income. 

5.Employee Stock Options to Voice their Opinion

In India, Employee Stock Options (ESOPs) have gained momentum to attract top applicants and retain the older ones. ESOPs give the workforce the opportunity to own the stakes in the company while aligning their interests with the long-term success of the organization. ESOPs can turn out to be a powerful motivator, especially for startup and tech companies where offering stock market options can lead to significant gains.

6.Long-term Incentives for Long Term Commitment

Similar to ESOPs, long-term incentives, like performance-based equity awards and stock grants can be used to retain employees. These types of incentives can develop a sense of commitment and ownership among employees in the long run.

7.Compensation Review and Benchmarking

A successful compensation strategy is not a magic wand, one needs to regularly review it and benchmark it against industry peers. These exercises are crucial as these can help businesses to remain competitive and attractive in the market. In the changing market dynamics, offering compensation packages that are relevant to evolving job market conditions and inflation is necessary. These necessitate periodic adjustments to help companies stay relevant and competitive.

Conclusion

In the diverse and competitive job market, having a well-crafted compensation strategy is critical for attracting, retaining, and motivating employees. By incorporating these seven points mentioned in the blog, businesses can create a package that fairly rewards their employees that is aligned with business goals and values. Similarly, SkizzleHR, a pioneer in the human resource technology industry offers payroll software that provides pay slips templates. These templates can be customized according to the business needs of the company and various components that companies would like to offer. 

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