Compensation Planning for your Employees

By F. John Reh , About.com Guide

Compensation - what you pay someone to entice them to continue to do work for your company - is a critical facet of any manager's job.

Often, unless you are the president or owner of the company, you have others helping you deal with compensation issues - like a human resources department or consultant.

Compensation includes many things beyond straight salary. It also includes benefits, perks, stock options, etc. You have to balance what these cost against what your employees perceives as their value, and that varies by employee.

You have to measure compensation levels against other employees in the company, against other employees in other companies in similar positions, and against performance.

You have to determine salary ranges for existing positions and adjust those periodically to compensate for economic factors (cost of living changes, inflation) and competitive pressures (industry demand for that type of employee, profit margins).

You often have to determine a salary for a new position, or if you promote someone to new responsibilities.

Plus you have to comply with government regulations regarding discrimination, contractor versus employee determinations, and union or other contractual obligations.

However, as if all of this isn't enough to keep you awake at night, the most important aspect of a compensation plan for your employees is: You have to keep them motivated to do the job the best they can.


Wage and Salary Information Sources

Let's look at some of the information that can help you and at some of the Internet sources where that information is available to you.

Some public agencies, such as the California Public Library's JobSmart program provide reference material. This site has links to compensation surveys sorted by different professions. It is an excellent place to start.

Human resources consulting organizations, like William M. Mercer, Incorporated offer complete consulting packages that include design and monitoring of salary ranges, competitive analyses, and incentive plans. They can also be expensive for smaller companies. Their web sites provide information about their services and most of them offer at least some free information. This Mercer article, for instance, has good information about hiring expectations, incentive plans, and average annual salary increases. You can also purchase more detailed information from them. This list shows some of the reports and surveys available.

Another HR consulting firm, The Hay Group, offers an online compensation information service called PayNet. Subscribers to this service can access up-to-date compensation information at their desktop using an Internet browser.

The Employease Network is a centralized database providing small- to mid-sized companies access to the technology and expertise to solve the mounting administrative headaches involved in managing employee benefits information (including eligibility, enrollment and billing information) in real-time.

The Employee Benefits Research Institute (EBRI) is a nonprofit, nonpartisan organization established in 1978 "to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education." This January 1998 Fact Sheet on typical benefit packages in medium to large private companies is indicative of the type of material available from them.

The US Government's Bureau of Labor Statistics (BLS) provides a variety of information, although much of it is older than that available from private sources. The BLS Occupational Outlook Handbook, however is a forward-looking product. Its Outlook for Specific Occupations provides general information on most occupations. It includes working conditions, training requirements, earnings levels, and sources of additional information.