It’s not enough to just establish a compensation plan. You also need to create one that considers all of your people data to create an informed and responsible model.
Luckily, doing so benefits everyone. Your people receive compensation that is fair and equitable, which helps maintain a positive workplace culture. And your organization has a budget in place that is sustainable and acknowledges all sources of data (AKA no last-minute surprises).
Read below to discover more benefits to establishing an informed, responsible compensation strategy and how to start building one today.
4 Benefits to Creating an Informed, Responsible Compensation Plan
Before diving into how to build an informed, responsible compensation plan, it’s important to know the why behind it.
- It aids proper budget allocation and planning. Compensation planning will help your organization properly allocate resources for employee compensation and benefits. Without a clear plan in place, it’s easy for teams to overspend or over-promise employees and candidates (which is also why it’s important to have detailed job descriptions approved at every level).
- It attracts and retains top talent. Remember that your compensation plan isn’t just about competitive pay. In fact, the most sought-after perks are actually health insurance and flexible work schedules. If you do your due diligence and create an informed strategy, you’ll be able to attract top talent and build a culture in which employees feel respected, increasing their chances of staying at your organization long-term.
- It drives referrals. Having a strong compensation strategy in place also drives referrals, a top contributor to talent acquisition. When your employees feel valued and supported at work, they are in turn more likely to recommend open positions to former colleagues.
- It increases employee trust. By communicating your compensation plan, you’ll increase transparency and build trust (which is much needed, as a HBR study revealed that 58% of people trust strangers more than their own boss).
How to Create an Informed, Responsible Compensation Plan
While compensation planning isn’t a one-size-fits-all process, there are ways that you can create one that is informed and responsible. In turn, your strategy will be backed by data and will benefit both you and your people.
Informed Compensation Planning
To create an informed compensation plan, you can sift through spreadsheets filled with information like hiring dates, employee compensation, competitive pay for the current market, and raise eligibility.
Or, you can…not do that, and instead use a people analytics platform to quickly create your informed compensation plan.
Leveraging Your Managers
With a modern people analytics platform, you can give managers access to data to help make informed decisions about employee compensation and promotions. When managers can see the right data, they can:
- See who is eligible for a raise or promotion
- Determine, using your compensation plan, the amount or percentage of raise
- View the specific compensation band for each employee
- Note the last time each individual received a raise
When all of this information is available at the click of a button, your leaders are able to make faster, better-informed decisions that are backed by data.
With the right access to data, your leaders will never have to spend more than a few clicks searching for info again. Everything from employment history to current progress plans are visible in ChartHop.
Considering DEIB Initiatives
Within your people analytics platform you can review hiring, compensation, employee, and performance data to help discover any trends or opportunities within your compensation strategy.
Here’s some suggestions on where to start as you begin reviewing your collected data:
- Analyze who is being promoted. Does a certain team or group earn promotions more often than the rest?
- Determine pay ranges. Are two people at the same level in the same position earning vastly different salaries?
- Evaluate bonuses. Are certain teams or positions constantly earning bonuses, while others are struggling to meet their key performance indicators (KPIs)? What does the support look like in each of these roles?
Analyzing these data trends will help you to evaluate the processes you have in place and create a more positive employee experience.
Communicating Your Plan
Finally, developing an informed compensation plan also means informing your employees of it once completed. This transparency is crucial, since employees need to know if and when they are eligible for a raise, how much it could be, and the extent to which it’s tied to their performance and the market.
Responsible Compensation Planning
Creating an informed compensation plan is just one part of the equation. You also need to plan responsibly.
So what does that strategy look like? A responsible compensation plan is one that is capable of retaining current employees (whether that’s through competitive pay, a robust rewards system, or strong benefits) and conscientious about headcount planning for the future.
It also helps you to define your organization’s compensation range that ensures sustainability. Lastly, responsible headcount planning means all decisions are fair, equitable, and objective.
Interested in learning more about organizational justice?
Access our 101 guide here
To create a responsible compensation plan, you need to:
- Ensure performance is measurable and tracked. When it comes to business decisions, data is king. And decisions about your people – the most important aspect of your organization – need to be data-driven. Investing in a people analytics platform with an employee experience function helps stakeholders at every level measure and track their performance.
- Have access to market data for benchmarking. Market data not only helps you make informed decisions about your organization’s total compensation strategy, but also helps you attract top talent and prevent unintentional biases for job offers and benefits.
- Establish transparent guidelines. Creating and communicating guidelines around your compensation plan, such as when you offer raises and promotions, helps streamline the planning process. Additionally, employees should have the ability to access this information quickly and easily to increase transparency and reduce confusion.
- Partner with your finance team. There shouldn’t be a gap between HR and Finance, but oftentimes there is when it comes to headcount and compensation planning. To combat this, work together to assign budgets for each team and use your headcount planning capabilities within your people analytics platform to forecast and share numbers.
- Share responsibilities with your managers. Your managers have to work within budgets, so why not make them a part of the process? What’s more, sharing responsibilities with your managers creates accountability for how they distribute their team’s money, ensuring they make the best decisions about employee compensation.
No more “what ifs” when it comes to team planning. With ChartHop, you can visualize your headcount – within a budget – to ensure you hire the right people.
Start Planning Today
Now is the time to dive into your people data to create an informed, responsible compensation plan. By doing so, you’ll not only prioritize your people, but also acknowledge their experience and efforts. What’s more, your organization as a whole will benefit from your detailed strategy and thoughtful transparency.
Responsible compensation planning also requires keeping your people data and information safe. Read how 1Password – a company whose business is security – ensured their compensation plan was secure.
Read the case study here