Common Compensation Issues and How To Tackle Them

Understanding common compensation and benefits issues is the first step in overcoming them. Keep reading to learn more about compensation problems and the importance of proper benefits.

Top 5 Compensation and Benefits Issues To Consider

Managing compensation and benefits in a competitive, ever-changing industry can feel overwhelming. HR professionals must determine the proper pay and benefits to recognize employees’ talent and hard work.

If you want to stand out from the crowd and impress potential employees, you need to tackle the following compensation policy issues within your business:

Competition From Similar Companies

Similar companies target the same potential new hires. Smaller businesses struggle with offering the same benefits and compensation as larger businesses since they have smaller budgets.

If you’re running a new business, you may face similar challenges that SMBs do. Luckily, there are other ways to leverage your company’s competitive advantage, but we’ll touch on that later.

Smaller Budgets

You could face budget issues even if you run a large corporation. You pay your existing employees and rent for your office space while investing in company culture and benefits. It can be challenging to find the budget to compete with other businesses in your industry, especially with labor shortages.

Many businesses are fighting for new hires in the post-pandemic world. Employees want good pay, paid time off, and benefits. With a smaller budget, you may struggle to attract the same type of talent that other businesses do.

Employee Expectations

There’s typically a gap between what employees expect to be paid and what employers want to pay them. Most employees don’t consider benefits as part of their compensation; they’re looking at the net pay they’re taking home. 

Consider providing a total compensation statement to your employees that includes a breakdown of all of their compensation methods. This statement provides transparency and a thorough explanation of how you’re compensating employees. 

Meeting employee expectations can sometimes be out of your budget, or maybe what they’re expecting isn’t something you’ve previously considered. Luckily, there are ways to bridge the gap between your and the employees’ expectations. We’ll dive deeper into this soon!

Internal Inequity

Pay reviews and compensation surveys often highlight inequities within your organization’s compensation rates. Your company might have an unnoticed wage gap, especially if you’ve been in business for a while. Over time, starting pays change, and existing employees aren’t always included in those changes.

Ensure your employees in similar positions make a comparable salary and get the same benefits. Otherwise, you could upset your workforce if they discover wage gaps. Keep in mind that pay equity discrepancies, especially between males and females, may create morale and legal issues that you want to avoid.

Executive Salaries

Another common compensation and benefits issue is managing executive salaries. This compensation problem mainly affects large public corporations required to reveal executive salaries.

If executive salaries take up too much of your budget or job candidates disapprove of their salaries, you may have trouble attracting employees. Consider limiting executive base salaries, and offer bonuses/incentives tied to your executive performance.

How To Solve Common Compensation and Benefits Issues

Compensation administration in HRM (human resource management) is complicated and ever-changing. The following solutions can help you solve any compensation problems you may come across:

Compensation Survey

Use compensation surveys to compare your current business practices and policies to the best industry practices of similar companies.

These surveys help you gather data on:

  • Compensation
  • Benefits
  • Policies
  • HR practices

Compensation surveys are an excellent strategy if you want to know what competitors are paying their employees. After gathering your data, adjust your compensation and benefit plans as necessary. 

Compensation surveys are an efficient tool for small businesses that want to see how they compare to similar organizations. They also help you see where other businesses are lacking and what you can do to increase your competitive advantage. Select survey reports that reflect your company’s industry, size, and jobs.

Compensation Planning

Create a robust compensation plan to combat common compensation problems. A plan prepares you for future compensation and benefits issues and creates a consistent and fair compensation strategy. Your compensation plan should support:

  • Your company’s business techniques and brand
  • Operating objectives
  • Employee needs/standards

There are three types of compensation plans:

  1. Straight salary
  2. Salary plus commission/incentive
  3. Straight hourly

Choose a plan that suits the size of your business and the industry it’s in. If most competitors offer a straight salary, it might be good to follow suit to keep up with industry trends and employee needs

Competitive Wages

Competitive pay is an effective differentiation strategy that helps meet employee expectations. This type of pay is comparable to competitors in the same market and is equal to or above standard industry salary.

Outsourcing An HR Team

No one understands compensation and benefits issues like HR professionals. Your compensation strategies stay organized and on top of trends with an outsourced HR team.

HR experts can increase competitive advantages for small and large businesses. Even if you run an SMB with a smaller budget, HR professionals can find solutions that fit your needs and budget. Outsourced teams also develop effective compensation strategies, plans, and surveys, so you can stand out in the job market.

Solve Your Compensation Policy Issues With AAIM’s Help

AAIM is an industry-leading HR provider that offers innovative compensation solutions to attract and retain employees.

Since 1898, we’ve helped businesses of all sizes reorganize their HR department and improve efficiency. Leave your compensation and benefits issues in the past when you partner with us. We create customized plans that suit your business’s unique needs and help attract talent.

Let us manage your:

While you focus on daily operations and the success of your business. Contact us today to learn more about our compensation solutions.


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