Employees are the pillars of every business. Their contributions, dedication and sincerity towards the business should be recognized and rewarded. You need to Compensate Employees according to their merits and performance from time to time. This will help you to retain them for a long time.
The fact is that without proper compensation programs, mid-sized and small businesses tend to lose top performers to their competitors. This means they have to bear the cost to hire as well as train new employees. There are also chances of damaging the existing customer relationships while eroding other employees’ morale. Profitable companies are those that focus not only on the client but also on employee retention.
Employee dissatisfaction is termed to be one of the major reasons for many businesses to fail. Over 80% of employees are reported to have left their company voluntarily for better positions and pay packages elsewhere. This is likely to hamper business and goodwill.
How to Compensate Employees and retain them effectively?
- SMART Goals: ‘SMART’ stands for “Specific, Measurable, Ambitious, Realistic & Time-bound”. Sales executives are expected to meet their monthly/annual revenue goals. It can also be opening up new accounts. Those employed in other customer contact services should have goals set for the ratio of customer complaints vs. compliments. It can also be a solution provided on the first phone call. Those in accounts receivable should set goals on outstanding revenue collected against set targets. Employees engaged in the manufacturing segment should set goals on product volume manufactured free of defects. Incentives are to be offered based on individual performance including overall team performance.
- Pay salary, incentives: Organizations boasting of having the highest employee productivity and morale tend to pay a mix of incentives, salary. Salary offers employees with consistent income and motivates them to perform daily tasks. The Incentives (commission and bonus) help motivate employees to meet as well as exceed their set targets. Salary should be paid monthly or bi-monthly. The incentive is better paid on the immediate meeting of the set goals. Monthly/Quarterly incentive payments can be more motivating when compared to annual payments.
- Offer non-financial rewards: Apart from cash, you should motivate your employees with rewards and recognition. You can Compensate Employees by offering annual trips to those who have achieved their set goals. Such trips develop teamwork and camaraderie. The way, you manage, develop and train your employees help enhance performance and retention.
- Incentive plan should be simple: A well-designed compensation plan involving incentives should measure over 2-4 performance factors. It should be simple and easily understandable by all employees. Realistic goals will enable them to achieve their set targets efficiently and quickly.
- Determine competitor offers: It will be wise to know what competitors are offering to their employees as compensation to retain their services. This is crucial and your compensation plan should be adjusted accordingly. Try to compensate more than your competitors and this will help retain your best employees.
- Reward top performers on a merit basis: It is simply not possible for employers to keep all their employees satisfied and happy. There are companies that tend to misallocate their funds by providing all the employees the same merit-based increases. Identify star employees and try to first motivate and retain them. The second objective should be to motivate and retain satisfactory employees. The largest salary increase and incentives should be provided to the stars, while satisfactory performers can be given modest increases. But those who do not perform well or not able to meet the set target should not be given any increase.
You need to devise clear-thought out strategies to Compensate Employees and keep them motivated all the time.