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.
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.