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Employee compensation is an important part of every business. But in a highly competitive market, it is no longer enough to just offer a great baseline salary. In fact, compensation packages including bonus payments, stock options, insurances or even lunch vouchers and gym memberships more often than not are what attract the best talent, so choosing a great employee compensation strategy can make all the difference for your business.
Here are some of the most common types of compensation, and how to choose what to offer to your employees.
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There are two main types of employee compensation: Monetary and non-monetary compensation.
Monetary compensation refers to any type of perks and payments that have a monetary value attached to them. This of course includes the baseline salary of your employees, which can be either a fixed and predetermined amount or calculated based on variables such as hourly or daily rates.
Monetary compensation also includes any type of indirect payments that are not cash on hand, but still hold a monetary value. These indirect compensations most commonly are:
Stock options
Gym memberships
Paid subscription services
Insurance payments
Lunch vouchers
Paid trainings
Paid leave
Use of a company car
Equipment such as phones and laptops
Free access to daycare
etc.
Non-monetary compensation on the other hand refers to any type of compensation that does not hold a direct monetary value. These are usually given out as a reward for achieving a specific goal or thanking an employee for an outstanding performance.
This can be done by publicly acknowledging and praising the employee or by offering a career development opportunity. Time off from work might also be considered as a non-monetary compensation.
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Coming up with a compensation package for your employees is naturally highly dependent on your budget and how much money you can (and want to) allocate for compensation. But there are other factors as well that play an important role in determining a compensation strategy. For example, if you have pre-existing partnerships and collaborations with other businesses, they might be willing to offer special discounts to your employees. And if you are working with remote employees, country-specific laws and regulations might also come into play.
On top of your own budget, you should also keep a close eye on the industry as a whole to determine whether you are above or below the general salary average, and to see what compensation packages your competitors are offering.
In addition to the actual content of the compensation package, you also need to come up with a strategy to determine how to measure and reward employee performance. Some of the benefits may be eligible to all your staff, while some rewards could be used as an incentive to push performance and efficiency.
Performance-based compensation needs to be put in writing and openly shared with your employees to incentivise them. This is best done during onboarding, and during regular feedback and performance reviews. Make sure to put fact-based assessments in place that are both achievable and measurable - and stick to your word when promising pay raises.
Ultimately, how much you can and want to spend on employee compensation is up to you, but a competitive salary package coupled with some exciting benefits can definitely help you get the best talent and attract the most qualified workers for your business. So keep that in mind when assessing your strategy.
Also remember that it is okay to revise and rework your compensation plan over time, and to adapt your strategy to fit your individual demands and needs at a given time.
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