Analyze and increase employee compensation structure

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Over the past few years, employee compensation has been in the news. Most people agree that, overall, pay rates have not kept up with the cost of living. The federal minimum wage has remained stagnant at $7.25 an hour while the cost of food, housing and education has soared over the past decade. Workers at fast food restaurants, factories and other businesses have taken to the picket line to demand higher wages. The topic of how much money people make and pay for structures in various businesses has become a topic of social and political discussion that stirs a myriad of opinions and emotions.

When the pandemic hit and the configuration of work changed for many, companies used it as motivation to tackle pay structures that might not have worked for a meaningful shift to working at distance. Whatever the impetus for a review or change in the compensation structure, it is imperative that companies regularly review the compensation structure of their employees.

Part of doing business

Apart from any political, emotional or social will to review the compensation structure of employees, it should be an integral part of operating any business with employees. As a general rule, companies should review their salary structure every three years. The focus should be on structure, not necessarily on specific salary amounts. Think of a compensation structure as a system of guidelines made up of several factors that determine how much to pay employees.

A regular review of an organization’s salary structure is necessary to detect any issues before they affect the operation of the business. As we have seen with the effects of the pandemic on businesses, things can change quickly. Leaders should review their compensation structure to determine if it still meets business needs, aligns with the company’s vision, and meets the company’s talent acquisition goals. Ensuring pay equity and identifying pay disparities due to race, gender or disability are key drivers in maintaining a consistent pay structure review schedule.

The meteoric rise of remote working has added an additional level of complication for companies that want to have the best and most comprehensive structures for their employees. Companies that haven’t had remote work as an option before may be wondering how to integrate remote work into their organizational process, communication flows, and compensation structure.

Companies should review the compensation structure on a regular, pre-determined schedule or when circumstances require, much like any changes brought on by the COVID-19 pandemic.

Everyone on the bridge

While senior leaders will ultimately put the compensation structure in place, it is an “everyone on deck” situation when discussing or changing a system. Heads of functional departments should be involved in the analysis process. The analysis stage is usually the “what works, what doesn’t work” stage of reviewing the salary structure.

Key managers are usually “on the ground” people and have a direct relationship with employees. They hear feedback about the salary structure from those it greatly affects and get an idea of ​​the caliber of talent working in the current structure versus the type of talent they want to pursue. The contribution of department heads and managers is an integral part of forming a well-received and functional compensation structure.

Communication matters

Companies analyzing their compensation structure for possible updates and changes should involve all employees in this journey through open communication. For example, sending a general announcement to everyone letting them know that the salary structure is being reviewed is a good way to stay transparent and prepare employees for possible changes.

If your company chooses to hire a third-party compensation consultant for the review of the compensation structure, it is ideal to communicate this to employees and management. Often it can make employees more confident in the review process if an outside consulting firm analyzes the current structure without bias.

If during the review it becomes apparent that there are upcoming changes that may materially impact certain employees, these changes should be communicated to those individuals or groups privately and prior to any mass announcement.

Once the final structure is communicated, human resources should be available to help managers answer any questions or handle any rejections or negative comments that may arise. When making decisions that affect large groups of people, it’s typical for feedback to vary. Companies can successfully roll out a change in compensation structure with open communication and preparation.

Analyzing and adjusting the salary structure can be a big, but necessary undertaking for organizations. A strong and fair compensation structure is essential to grow a business, best serve employees, and stay competitive in a dramatically changed post-COVID workspace.

Lauren Winans is the Managing Director and Senior Human Resources Consultant for Next Level Benefits.