When tough economic times hit, it’s common for businesses to reevaluate major expenses. And with employee wages and salaries making up a large part of many companies’ budgets, employee compensation is often one of the top areas under review.
If you’re in a spot where you need to reduce costs while still rewarding employees, a compensation management platform can be an invaluable asset. We’ll take a closer look at how a compensation management solution can help HR professionals retain top performers, stay on budget, and promote pay transparency.
- Benchmarks empower you to reward top talent competitively.
- Compensation guidelines can help managers stay on budget.
- Pay transparency influences employee trust and loyalty.
- Performance data helps you back up every merit increase.
Retaining Top Performers
Hiring new employees is pricey — background checks, IT equipment, training, and other expenses can quickly add up. While the cost of onboarding new employees varies by industry and company size, Indeed estimates the cost to hire a new employee ranges from $4,000 to $20,000 for most companies. That’s why retaining your top performers is even more critical during financially difficult times.
But retaining existing talent can be challenging, especially when tough times mean revisiting your spending. This could include eliminating certain perks, issuing smaller-than-expected raises, capping bonus incentives and sales commissions, or even cutting employee pay — all of which can have a significant impact on employee engagement and, ultimately, retention.
If your employees don’t feel they’re being compensated fairly, they will leave. That’s why your business needs to approach employee compensation strategically — and the right resources can help. For example, a compensation management solution can help your business use data to ensure your compensation process stays competitive and equitable and that it matches the value each individual brings to your organization. Compensation software helps you do this by comparing your pay ranges to both benchmark data and performance management data.
Staying Competitive With Benchmark Data
Salary benchmarking compares any internal role’s job description to similar jobs in other organizations. This comparison allows your business to get a better understanding of how similar roles are compensated, so you can offer competitive pay that meets or beats that of similar businesses. Your company can use this information to establish pay ranges for your roles and job levels, helping you ensure future and current employees are paid a salary commensurate with their experience and skills. Basing employee pay on research and data can ensure your business offers fair, equitable pay across your entire organization, helping further your diversity, inclusion, equity, and belonging (DEIB) efforts.
Lattice’s own Compensation Benchmarks powered by Mercer give businesses access to global, curated data based on specific parameters, like company size, industry, geographical location, and specific job titles, to make informed and equitable pay decisions. This helps your business build more targeted compensation programs that pay talent competitively and equitably based on their role and location. It can also help with budget forecasting if you have an idea of what roles you’ll need to hire in the coming year.
Benchmark data also allows your company to identify whether employees are being underpaid and to adjust their salaries if needed. That way your employees feel fairly compensated and remain loyal to your company.
Using Employee Performance Data
To retain your top performers, you must first identify who these individuals are. Some compensation management tools can actually integrate with employee performance data from another HR software or talent management solution like a Human Resources information system (HRIS) or human capital management (HCM) solution. Even better, if you’re trying to consolidate HR tools, consider choosing a platform that brings compensation management and benchmarking together alongside HR focus areas like performance, employee surveys, and development — a platform like Lattice.
Lattice connects performance and compensation to allow your business to identify and retain top performers. You can easily see where top performers land in their salary band, so you can ensure they receive a raise appropriate for the value of their contributions come your business’s next compensation review.
Staying on Budget
Rewarding talent is important, but you also need to stay on budget. Again, employee compensation is one of the largest costs for many businesses, so it’s important to pay employees a competitive wage without breaking the bank. But when it comes to allocating funds for raises and promotions, your business will want to ensure you and your managers are on the same page — especially at a time when most companies are tightening their wallets.
A compensation management solution can make all the difference when it comes to budget tracking. Instead of working out of emails and spreadsheets, your business can share dashboards of final budgets with managers to give them a clear understanding of how much money they have set aside for employee salaries, promotions, and merit raises. This way every manager knows the minimum and maximum a direct report can earn within their job level, as well as the maximum percentage merit increase any employee on their team can receive. With knowledge of exactly how much the company has budgeted for their team, managers can determine the best allocation of these funds to retain talent and reward hard work while staying within the budget.
During uncertain times, employees want to feel informed about what’s happening within the company and how they’ll be impacted. Corporate transparency about employee pay can help employees understand how their pay is determined and boost their trust in your company. After all, employee compensation packages are designed to reward employees for the value they bring to your business, so it’s in your best interest to help employees understand how your company determines their pay.
Unfortunately, most businesses don’t know how to work toward pay transparency and many managers don’t know how to talk about it. This is where compensation management software’s ease of use can really shine. Using HR solutions for compensation planning, HR managers can effectively do away with secret spreadsheets, arbitrary raises, and pay bias. Plus, as we mentioned earlier, using benchmarking and performance data to determine employee compensation can help guide your business toward pay equity and achieving your larger DEIB goals. With all of your employee data in one platform like Lattice, your business can use performance, engagement, and salary data to determine employee compensation changes.
When your managers know salary bands and where their employees fall in them, they can better communicate your company’s total compensation packages with their direct reports. This not only allows managers to help employees understand how their salary is determined by the company, but it also allows them to help their team understand what they need to do to be eligible for compensation increases. Pay transparency can help motivate and encourage employees to develop their careers within your company. Having accurate, real-time information can also help your business make data-driven budget decisions that support pay equity, efficiency, and consistency across your entire organization.
Choosing the Best Compensation Solution
While it’s an initial investment, the right compensation management system can help your business gain the visibility it needs to create a long-lasting compensation strategy. But your compensation data shouldn’t live in a vacuum. By bringing compensation, benchmarking, performance, employee surveys, and development together in one system, your business can get a full picture of the employee experience and make data-driven decisions around employee pay. The best compensation tools, when integrated other HR software, allow you to:
- Integrate employee performance management data.
- Create, run, and analyze employee total rewards surveys.
- Connect pay bands to job levels.
- Give employees clarity into how compensation decisions are made.
The superpower of this HR software solution isn’t just saving your business money, it’s helping your business become more people-centric. For example, your business can conduct an employee survey on total rewards to better understand what forms of compensation your employees value most. You might learn that they’d prefer more flexible scheduling rather than a childcare stipend, which can help your business save costs while still giving employees what they want. Or, you can integrate your performance management and compensation data and finally get your pay-for-performance model off the ground.
Combining all your people data in one cloud-based platform, like Lattice, can transform the way your business approaches its compensation programs. It can help you think comprehensively about your compensation strategy, letting you stick to your budget while still rewarding employees for their hard work and motivating them to perform their best.
Employee pay is a critical part of attracting and retaining talent, especially during uncertain economic times. But without the right data, determining employee compensation can feel like a guessing game. When it comes to establishing pay bands, calculating merit raises, and issuing promotion salary increases, a compensation management system like Lattice Compensation can be your business’s best asset.
Lattice Compensation helps HR teams streamline every part of the compensation review process in a secure, centralized hub. Your business can even connect engagement, performance, and pay data so you can make informed compensation decisions that ensure employees are properly rewarded for their contributions.
To learn more, schedule a demo of Lattice Compensation and see first-hand how our integrated approach to employee compensation drives results for your people and bottom line.