For most people, earning money is a principal reason to go to work. It’s also one of the easiest ways for them to measure themselves and their achievements.
Remuneration (how you pay and reward your people) can get left on the shelf, due to financial reasons or because constructing competitive pay packages can take a lot of effort. But there are risks to getting pay wrong, from potential legal issues to the damage it can do to employee motivation and retention, and the company’s reputation.
Why is remuneration important?
Obviously, if your wages or salaries are lower than your competitors, it can be difficult to attract talented people and you risk losing the ones you have.
But remuneration is more than money; it’s about offering a well-rounded package to keep employees motivated in their role and in helping the business achieve its goals. So consider the elements that make your company a great place to work, be it better benefits, more flexibility, training opportunities, career growth, or strong workplace culture.
Things are constantly changing, whether it’s minimum pay, employment legislation, or the broader market, so your business needs to keep pace. Remember, you’re usually better off paying good employees a little more than having to look for new ones, especially in a tight labour market. Transparency is also key, so everyone knows what the individual and wider company targets are, and when and how remuneration is reviewed.
Different remuneration strategies
Here are the 3 main ways to approach your remuneration structures:
- Pay low rates – so long as you meet legal minimum entitlements, paying below the market is good at keeping your wage bill down, with less impact on cashflow. The flipside is accepting high churn or employee unhappiness, and/or compensating in other ways.
- Pay market rates – the most common approach as it takes pay out of the equation and doesn’t unnecessarily inflate your costs. You will still need to distinguish your company for other reasons to keep employees happy.
- Pay above-market rates – Some companies, like Netflix, use this strategy to attract top talent. It can keep employee turnover low but it’s obviously expensive.
This article has a good look at remuneration, how to review it and pay people effectively, and understand pay parity.