YOUR COMPENSATION PROGRAM

      A major goal of any compensation program is to pay employees salaries and benefits competitive, fair, and comparable to similar jobs in other organizations.  In a perfect labor market, there would be a single wage for any given job.  In real life things are not so simple, and we find a wide range of compensation packages. Here are some ideas to keep in mind.

How to give a raise.

      Generally, a 15 to 30 percent raise is considered standard for a promotion to a higher level job.  The general guideline for raises that do not involve a promotion is between 5 and 10 percent for acceptable performance.  Less than this is usually not financially significant or recognized as an improvement.  Much more than this range is usually unnecessary and can be considered financially irresponsible, unless there are exceptional considerations.  In most situations, it is better to give several smaller raises over a period of time, than one big raise.  Just make sure the smaller raises are large enough to be financially felt by the employee (no lower than 5 percent is recommended).  Before you give an employee a raise, make sure they know it is coming.  Don�t surprise them in their pay check.  Most people don�t like it when their managers surprise them too much.  When a promotion occurs, promote the fact that you made a good decision.  The reason for the promotion should be well known, but never inform others of the amount of pay or the amount of financial increase.

How to reduce pay.

Informing employees of the business reasons for the reduction is important, they should not feel singled out individually.  Any type of pay reduction, requires up front planning.  Whether a single individual or a group, Explain the conditions causing the change and anticipate questions, concerns and reactions such as: anger, shock, confusion and grief.

Money is not a motivator.

      Modern management theory believes that money is not a motivator.  Giving an employee more pay does not equate to a higher work performance.  Money is a satisfier.  When people get it, they will not necessarily do anything different in their actions or behavior.  At best, money motivates until you get it.  Then any motivational value is gone.  Income can be a measure of self worth, or self confidence, but not a motivator.  To motivate people to a higher level of performance you must make them feel that their job has value and that what they do can have a beneficial effect on something or someone.  Even a repetitive routine job can have meaning.  Inform your employees of the results (both good and bad) achieved by their actions.  Praise your employees openly and criticize your employees in private.  Bonuses, based on performance can be motivating, when they are given as a reward for good performance and are a result of work not a result of a managers good nature.  Being a nice guy, and giving raises that are not deserved can have a negative effect on employee attitude and motivation.  Working on a commission acts as a carrot, it can motivate the employee to reach a target, but once that target is reached it no longer becomes a motivator.

Why employees stay or quit.

      Employees stay on a job or quit a job for many reasons.  Some of these reasons can be personal and unrelated to work.  However, if your turnover rate is more than industry standard then people are probably quitting for more reasons than just natural attrition.  This is a sign of a problem, which may or may not be salary related.  Did you know that the number one reason why people leave their jobs is because of personality conflicts?  A good manager or supervisor can be a vital element in resolving conflict.  He or she can create an atmosphere where people feel a sense of belonging.  People stay where they feel that they belong.