Your organization may be at risk of losing top talent and may face future recruiting challenges as employees weigh their employment options more carefully in a recovering economy, says Daniels, who is senior consultant at Keating Advisors, LLC.
Hiring Is Heating Up
Recent BLS data, says Daniels, show that there is an increase in hiring. For example:
- In December 2012, total private employment rose by 168,000.
- Since reaching an employment trough in February 2010, the private sector has added 5.3 million jobs, a gain of 5.0 percent.
- Since February 2010, nonfarm job gains have totaled 4.8 million. (The largest increases have occurred in professional and business services, education and health services, and leisure and hospitality.)
Furthermore, Daniels says, by some surveys, nearly half of the hiring is for new positions. Bottom line, competition for talented employees is going to continue to grow.
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What Is Your Compensation Plan?
To develop a solid foundation for your post-recession compensation plan, your organization should explore the following questions:
- What is the overall goal of our compensation system?
- What do we want to pay for? Performance? Seniority? Something else?
- What is the role of performance reviews/appraisals in our compensation plan?
- Which strategic areas that drive the organization’s ability to achieve its goals and growth objectives are not staffed properly?
- What type of employee is needed to achieve the strategic vision of the organization, post-recession?
- Do we have the talent needed to meet our stakeholders’ current and future expectations?
- What is our policy around communication? How transparent do we want our compensation plan to be?
- How can our compensation plan support our management philosophies and overall organizational objectives?
One very revealing exercise, says Daniels, is to compare the answers of HR and leaders to those of the compensation professionals.
Post-Recession Compensation Plan Checklist
Daniels offers the following checklist for a good compensation plan:
- Supported by an agreed-upon organizational compensation philosophy
- Supported by clear compensation administration policies
- Driven by up-to-date market data so that it is externally competitive
- Culturally appropriate and understandable for the organization
- A tool for encouraging internal equity
- Cost-effective, recognizing organizational budget realities
- Supportive of a long-term ability to attract and retain talent
- Legally defensible
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If your organization instituted a hiring and/or salary freeze or if only very limited compensation increases were delivered to employees during the recession, you may have fallen behind the competitive labor market.
In order to plan for the future, you must know where you currently stand, says Daniels. Key steps to take are:
- Review your organization’s current base pay structure.
- Market price your organization’s positions (or a representative sample) to determine current competitive market rates.
- Update the base pay structure, if needed.
- Review where employees fall in the base pay structure, and evaluate where employees should be.
- Explore variable pay.
In tomorrow’s Advisor, Daniels’ four approaches to pay structures, plus an introduction to the best way to identify wage-hour violations—the self-audit.