Determining Compensation Structure

Compensation is very important to every company. If an employee feels as if they are not being compensated enough for their input into the company then that will result in that person leaving in the company increasing the turnover rate. In order to make sure that every company has the lowest turnover rate they possibly can they need to look at their compensation and benefits to every employee. Before going into these meeting I would have to make the CEO aware that a 10 minute meeting may not be sufficient in giving a complete run down of everything the company will need to look at. A compensation system takes a lot of time and effort in evaluating because it is more than just pay they have to look at. They need to look at job structure, pay level, and benefits package. If I was asked to give a quick break down of what this company needs to look at it would be as follows. The company first needs to look at its pay structure. If they are looking at how to evaluate their compensation practice they need to know how they are paying their employees. They need to make sure that every employee is feeling their worth in their pay. If they feel as if they perceive an inequality of pay between someone with a similar job then behaviors and attitudes will change drastically. This will result in an employee turnover, or less input into their work making production of the company lower. If the company doesn’t know their pay structure and how they are evaluating pay they can either look at product market factors or labor market factors. This will help them determine if what they are paying their employees relates to market competition, market demand, and employee work. Another thing they need to look at in determining compensation is job structure. …show more content…
It is like pay structure in that they are basically ranking jobs based on employee output and determining the worth of the jobs. They can either evaluate these jobs by using the ranking method, categorization method, or point/factor systems. They can benchmark these jobs and use different analysis to find what the pay and job structure should look like for their company and if they are paying everyone the right salary for their position. When evaluating their company they need to look at what they want to motivate their employees to be doing. People do what they are incentivized to do, so this is a big step in evaluating their compensation. There are many things that a company can do. They can pay for performance which is motivating these employees on a performance level looking to increase output and increase profits that they are making the company. When paying for performance you can either pay based on past performance which is a merit based pay, or you can do an incentive pay which is future focused and once they reach a goal for themselves in their level of output then they are rewarded. This is much like that of a salespersons salary where they get bonuses for reaching a certain number of sales, so this increases employee moral because they know that the more work they put in the more they are going to get out of it. With any incentive and benefit package you really have to be careful in making sure that everyone in the company that can get rewarded is getting the even opportunity to get incentives. …show more content…
This again will rely on the job structure and who in the company can earn incentives for their output. You have to be careful of agency issues and discrimination laws; because either can be a factor if someone feels they are not getting an equal opportunity of compensation. The company needs to determine what they want employees to get out of their compensation practice. Are they trying to get more employees buy in for the company, increase productivity, or increase employee moral? All of these factors have a hand in figuring out compensation packages. Profit sharing and ownership is a practice where the company is trying o get employees more invested into the company they are working for by making them feel as if they are a larger part of the company and that they