According to Fortune, “He read an article that more money for people who make less than $70,000 leads to increased happiness.”
This move has since generated some backlash, including some employee turnover, as a result. While many employees appreciated the salary bump, some expressed dissatisfaction with their earnings compared with their colleague’s earnings.
That is, an employee who currently earns $65,000 per year doesn’t think it’s fair that they’ll be earning the same as someone who currently earns $45,000 per year.
Why a Strategic Compensation Plan Matters
Compensation is often a critical factor in attracting and retaining talent. LinkedIn’s 2015 Talent Trends report found that 49% of respondents would accept a job offer for better compensation.
Price’s plan will certainly help him attract talent that would normally fall under the $70,000 threshold, but will likely be augmented with a more strategic compensation plan to retain that talent, and to attract and retain talent for high-demand opportunities.
High-demand opportunities include highly skilled or specialty jobs, jobs that are critical to company success, and jobs that need to be filled immediately. In these cases, qualified talent will have plenty of choices about where to work and will expect more competitive compensation.
Gathering Data to Inform Your Compensation Plan
A common compensation practice for new hires is to find out what the candidate is currently earning, and either match it or increase it around 10%.
Then, each employee is given a fixed percentage increase year over year to retain them. However, this may result in unfair compensation practices if the candidate was earning less than their market value before they were hired – and the annual raises usually aren’t enough to keep up with their value on the open market.
Instead of using these antiquated compensation practices, find data to inform your compensation plan. Utilize an enterprise compensation management solution, or use publicly available data on sites like Glassdoor, to determine a fair compensation range for the various positions or paygrades within your organization.
Benchmark this data against your current compensation, as well as your competitor’s compensation, to make sure they all align. If not, consider increasing salaries that appear too low, or freezing salaries that appear to high.
Talent with fewer qualifications or less experience will naturally be on the low end of the compensation range, while talent with more experience, a better education, or a longer tenure with the company will be on the higher end.
For the most high-demand candidates, BountyJobs’ 2015 Direct Hire Agency Benchmarking Report™ shares important market data around which industries, job categories and regions are the most competitive – so you can increase compensation to match demand.
Doing this exercise on a regular basis will help you stay competitive in terms of compensation so you can attract and retain the talent you need for your company to be successful.