by Jennifer Loftus
Smart compensation pros can use this recession as an opportunity to re-evaluate how they pay employees.
You might be surprised what you find when you start taking a close look at your compensation systems. You could discover that you haven’t been spending your merit pay budget as efficiently as you could. Now that the economy is forcing you to, you may learn that you can get better performance from employees if you’re smarter about the way you reward them.
Here are four recession-smart compensation strategies that you might decide to continue even after the economy rebounds:
1. Concentrate pay raises on your superstars. We all have A, B and even C players among our employees. Typically, we pay the all-stars more. But we don’t always give them bigger raises than the rest of the crew. We should.
If your merit budget has shrunk along with your organization’s revenues, the average pay raise is smaller, too, probably down to 2.5 to 3%. Is that enough to retain your top talent?
My guess is that it’s not. Even if you’re laying off employees, retaining your best ones is more important than ever. These are the people who can see your organization through to the other side of the economic recovery. Don’t give them any reason to go to work for one of your competitors. Instead, give them good raises.
By “good raises,” I mean at least 5%. Go for 6% if you can. Sure, that means your B and C players are going to get less of a bump. But they’re less important to your organization’s survival.
Identify your most prolific performers and your mission-critical staff. Pile on the pay as much as you can.
2. Restructure. Chances are, you’re following the same pay routine you always have for sales staff and others who earn based on performance. It’s time to take another look.
Incentive pay should reflect goals met. Take some time to re-evaluate those goals. Are they too easy to reach, or has the economy made them impossible to achieve? You might need to ratchet the goals up or down until the recession passes.
While you’re at it, add incentives for those who bring in new business. It’s important to maintain relationships with existing clients, but that’s usually easier than recruiting new ones. Even in a down economy, new opportunities exist. Make it worth your employees’ while to jump on them.
3. Leverage the value of work/life benefits. When money is hard to come by, work/life benefits can help fill the void.
Over the past year or so, we’ve seen a consistently increasing demand for benefits beyond compensation. Perhaps because money is tight, employees seem to be placing a higher value on personal time and family. Work/life benefits such as telework, flexible schedules, compressed workweeks and part-time hours or job sharing satisfy that demand.
Extra paid days off, of course, are the premier work/life benefit. If you can afford to add them, your star employees might return the favor with greater loyalty.
4. If there’s less work to do, offer more training. Depending on an employee’s pay level, it could cost less to pay for a college course or a professional certification than to offer a raise. Slow times for your business can be good times for getting employees up to speed on what’s cutting-edge in your industry. Plus, most employees consider training a valuable perk.
When the good times roll around again, consider hanging onto the compensation strategies that you develop while you’re in survival mode. They could help your organization run leaner and your employees work more productively even when business is thriving.
Author: Jennifer Loftus is national director for New York-based HR consulting firm Astron Solutions. Contact her at (212) 792-8885 or email@example.com.
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