Issues in Compensation Management
Compensation structures are a leading issue for human resources departments in companies of all sizes. In a small business, the issue takes on greater significance, because most small business budgets are limited in nature, and therefore, compensation packages may be limited as well. Small-business owners are challenged with providing a competitive pay rate, attracting top talent and still maintaining fiscal responsibility.
While a number of issues impact small-business recruitment efforts, including work-life balance and corporate culture, compensation packages are a critical factor to many would-be employees. In other words, while employees may be attracted to your business for a variety of reasons, salary and benefits are important, and they play a major role when it comes to recruiting top talent to a small company.
Compensation management is important not only to recruiting top employees but to keeping them in their positions once hired. Small businesses often invest significant amounts of time and money in training new staffers and bringing them up to speed. A company that loses a key player to the competition because of poor compensation management not only loses a talented employee in which it has invested, but the business also incurs additional expenses when it comes to rehiring and retraining for the vacated position.
Job satisfaction and a positive workplace culture often motivate staffers to perform at top levels, particularly in a small or close-knit business. Compensation also is critical to staff motivation, making compensation management a vital area of operations. Staffers who feel they are adequately rewarded for their contributions and their efforts are more likely to perform their jobs well, have a decreased level of absenteeism and have greater longevity than staffers who feel underpaid or under-appreciated.
Finding the Balance
According to the U.S. Small Business Administration, many small-business owners meet the challenge of compensation management by using their small-business status and flexibility to their advantage. For example, small businesses often allow creative scheduling options such as flex time, job sharing, telecommuting and work-from-home options as incentives for attracting talented staffers. Mentoring, professional development and a policy of promoting from within can also help offset compensation challenges by providing staffers with incentive for internal advancement. Other perks that can help a small business manage compensation include a company wellness program and free memberships, such as a gym membership.
According to the U.S. Department of Labor, utilizing profit-sharing, bonus or incentive programs can help small-business owners bolster the earning potential of staffers. The DOL also notes that incentive plans have the ability to help a small business retain top performers. In this sense, the company is able to offer the potential for higher degrees of compensation based on the performance of the company or of individual staffers.