How to define the best compensation of employees
There are 4 main steps in determining an employee compensation plan.
- Research: It is very important to understand how employees in the same industry are paid in a market. Research can be done by looking at job boards to find out what other companies are offering (including benefits). For example, Indeed, LinkedIn or Seek.
- The remuneration structure.With all the data collected in the research phase, create a structure with different scores (often 10). Each of these grades will have a range of salaries and employee stock-options. For specific positions (such as sales), each grade will also have a defined commission scheme.
At a more advanced level, the pay structure should be tailored to each department (e.g. sales or marketing) and each level of seniority.
- Benefits
Determine what standard benefits your company will provide (including overtime pay). For example, free meals or remote / hybrid work
- Adjustments and updates
Adjust the remuneration structure in line with the financial forecasts and the recruitment plan.
Also ensure that there is a budget for employee promotion. The structure should be updated according to the different stages of the business.
The remuneration of a start-up company will not be the same when the company has many employees and different departments.
Recruiting and retaining talent is a critical issue for a business owner. The departure of a good employee can be very damaging and costly.
Good compensation is one of the reasons why an employee decides to join or stay with a company. It is therefore fundamental to combine a good company culture, a strategic vision and appropriate compensation.
