Compensation strategy often comes up when a company is looking at its inner workings to determine which areas need a makeover. Consider these signs as evidence that something is not working about your current compensation strategy, and use it as motivation to make changes.

Of course, any one or two of these signs alone could indicate a different issue at hand, perhaps the state of the working environment or lack of growth potential. But if your company is seeing multiple instances of the below issues, then it’s time to take a closer look at your compensation strategy.

1. Poor Performance and Absenteeism

Dissatisfied employees don’t work as hard, combining poor performance with frequent absenteeism. Resentment over low pay leaves workers without a reason to really show up, making low-productivity one of the highest costs to your business.

2. Lower Than Usual Retention Rates.

Entry and mid-level employees in particular know that they can easily compare options and earnings and leave with little notice to go to a company that offers them better benefits or salary. Employees at those levels have less to lose by switching jobs, while a company that is willing to pay them what they are worth has a lot to gain from retaining a more loyal workforce.

3. An Outdated or Ineffective Performance Review System

A matrix that exists simply as a matter of course is useless, and can indicate that your company is unwilling to invest in your employees. If your evaluation system is complicated, outdated, or ineffective, then it is just not useful. Therefore built-in performance measurement tools should be one of your main criterion when choosing a compensation program to build a new strategy.

4. Little Relationship Between Performance and Pay

For a incentive pay program that is clearly defined and consistently administered, employees are willing to show up and prove their worth. However, if there is no connection made between performance and pay, there is less tangible ways for employees to gauge their efforts in accordance with their financial goals.

5. A New Competitor Offers Higher Starting Wage

The entrance of a new player will undoubtedly come with attempts to recruit your employees with higher compensation. This will be all too easy with workers who are already unhappy, so your organization will need to earn employee loyalty, first by delivering financial security.

6. Pay Disparity Within Your Company

Allowing an imbalance of salaries between similar job types throughout different areas of your company leaves your organization at risk for a lawsuit, as well as being highly inefficient. While disparity can easily happen, particularly when operating across several geographical locations, a compensation and salary survey product can reveal current market rates for similar job types, and compare that information with your current numbers as you attempt to better streamline your numbers.

7. Negative Employee Feedback

While every company may expect to hear that a few employees are unhappy with salary and benefits, consistent responses from employees that indicates widespread dissatisfaction with compensation can tell a more worrisome story. Employees typically are aware of their earning potential in the industry, and if they are giving negative feedback, it is likely that they are already looking for other options.

The human resources team can sometimes feel pressured to minimize payroll costs in order to increase margins in other areas, but, as indicated by these signs, insufficient compensation can often make itself evident in other ways. Instead, explain to decision-makers that reducing turnover rates, eliminating pay equity gaps, and improving employee experience by investing in a clear compensation strategy will make more sense in the long–and even the short–term for the organization as a whole.


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