Now is a great time to start planning for your yearly strategic budgeting meetings. And since employee compensation is often the largest line item in a budget, it will pay big dividends to think through your compensation structure and get the data you need to make informed budgeting decisions, and to back up your budget requests.
Here are some compensation budgeting tips to get you started:
- Know where you are in the marketplace when it comes to compensation. Now is a good time to focus on collecting the data you require as you prepare for first of the year/end of the year performance reviews. The market has moved a lot in the past two years, and some positions – especially tech positions – are still continuing to outpace the general market. If you think the 3% across the board average applies to your Software Developer, or your QA Engineer, you may want to do some research with more current salary data.
- Always ask for more than you think you’ll need. It’s always better to have some extra budget to work with, or to use for the unexpected raise request that may be well-deserved, than to come up short.
- Be strategic with pay increases. Are you giving people increases just for keeping a seat warm (i.e. cost of living adjustments)? Or are you being more strategic with your available dollars and linking pay to performance and results? If your CFO gives you a 3% budget increase for base salaries, are you going to give everyone a 3% raise? What do you think that does to your top performers, when they see Lazy Len getting the same increase they got? Why not give Rockstar Rudy a 5% raise and Lazy Len a 1% raise? If you’re afraid of having the ensuing conversation, then you likely don’t have the right performance management process in place, or you may need some new tools in your management toolbox for having difficult conversations. Either of these we can help with.
- Better results should result in better rewards, whether that’s cash or some other form of reward that is more meaningful to that employee. Find out what motivates your staff and leverage it to the company’s benefit, creating a win-win possibility.
Having a consultant in your pocket to help with providing expert guidance and data can be very helpful in making informed decisions. A good one can also work as your ally to provide objective recommendations and supportive data to your company leadership.
For more tips and information regarding creating a successful compensation structure including, how to have good conversations about compensation, how to use performance reviews effectively, and how paying the right wage can create a successful business check out these latest blog posts:
Compensation Conversations: How to make them better for your managers and employees.
Thanks to the Internet and social media, employees and potential candidates have access to salary information. How do you make sure that your employees feel fairly compensated? It turns out that paying more money isn’t the only answer. Learn more!
Do Ratings Help or Hinder Performance?
Grading on the curve may have worked for high school and college students, but is it really appropriate to use in evaluating employees? Microsoft recently abandoned their bell-curve-based rating system. Companies need some way to measure and reward performance, so what’s the solution? Learn more!
A Pay for Performance Perspective and Tips
When you give out pay raises, are you giving your worst performers the same raise as the guy or gal who brings in three times as much revenue? Many organizations tend to give across-the-board raises of about the same percentage to all employees. Which means the poor performers have no incentive to work harder, and the top producers have plenty of incentive to find a job with another company that rewards them better. How can you use pay incentives to create a successful business? Learn more!