It’s a simple idea: Having a well-structured compensation plan will help a company attract and retain top talent.
Smart businesses know a well-organized compensation plan is particularly helpful in drawing top talent from fast-paced industries like technology. The IT labor market can change dramatically, making it hard for businesses to keep up with going wages. When a company doesn’t keep up with going rates, it quickly starts to bleed top talent.
Consider the following steps in structuring your company’s compensation plan.
Having an official, organized compensation plan can help connect compensation with company goals and strategy and help generate transparency and fairness, in addition to boosting engagement, morale and employee retention.
The creation of a modern compensation plan starts with executive buy-in and connecting organizational resources with company goals. Once you’ve established your overall compensation approach and obtained buy-in, it’s time for you to look at individual jobs, as aligning roles across your organization is critical for benchmarking purposes.
The general approach here is the reverse of when you’re writing a job description – less is more. When you’re benchmarking roles in your company, you’re looking at education, experience and the hard abilities someone must have.
Define a Strategy
Defining a strategy calls for an understanding of where you contend for talent, against whom, and how you can compensate through pay and benefit.
Many companies look at talent-pay comparisons within their own industry. However, with essential jobs, you might have to widen your scope. For instance, software developers might be considered a separate market, since you are competing not only with businesses like yours but with other technology businesses, as well.
You should determine where you are seeing the most turnover and what is causing that turnover. You’ll then have to decide how competitive you want to be in relation to the market.
One of the first things to consider is whether to use pay ranges or pay grades. Pay grades tend to be a better option for smaller companies with fewer locations, because grades have comparable market value and internal value to the business.
To put your existing jobs into your compensation ranges, you’ll have to reference market data to locate the nearest midpoint to your target percentile and then modify based on internal alignment, location and market factors.
Putting the Plan into Place
When putting your plan into practice, a critical decision is how transparent your compensation plan will be with regards to your staff members. The level of transparency should be founded on your business, its culture and your talent strategy. It’s important to establish the degree of transparency that will foster the most trust and engagement among your staff members.
At Thompson Technologies, we work with our clients to provide talent at compensation rates that make them highly competitive. If your company is currently looking for a talent acquisition solution, please contact us today.