How to create a well-balanced compensation and benefits strategy?
When it comes to compensation and benefits, both are key factors in recruiting and retaining top talent. Employees are looking to join organisations that pay them a competitive salary and provide benefits that help them with healthcare costs, mental health programs, home office reimbursement, and retirement plans. It is now more important than ever for HR teams to build an effective compensation and benefits strategy to motivate their workforce and attract new talent.
We partnered with hibob for a webinar on this topic, and we had so many great takeaways that we thought we’d share in a short blog article. Panellists included David Duckworth, Co-Founder & COO at Ben, Patrick Maier, General Manager at Payspective, and Sophie Matthews, People Manager at PayFit.
In this short piece, we’re going to write about their insights on how to implement an effective and well-balanced compensation and benefits strategy:
What are the challenges businesses face in relation to compensation and benefits?
All three speakers agreed on a few recurring pain points businesses, especially smaller businesses and startups, face when implementing a compensation and benefits strategy, such as:
- Understanding what the right package is for a particular role and how to structure it
- Lack of benchmark
- Admin required to manage the different types of benefits
- The cost of benefits and lack of engagement
- What are the right benefits? Bonuses, stocks - who gets what?
“The main challenges our customers come to us with are that they want to offer a great benefits package, but they find it really difficult to go out there and source a bunch of different providers. So it’s important to think about what their employees actually want, what they value.”
Co-Founder & COO @Ben
These challenges often come up when businesses start implementing a compensation and benefits policy. Maintaining fairness, equity, and inclusivity is also key when creating a compensation and benefits policy. It is important to address these points before deciding on what compensation and benefits to offer.
How can businesses maintain fairness, equity and inclusivity?
- Having processes and a clear compensation and benefits policy in place early on to avoid giving raises and promotions only to those who ask for them.
- Knowing where your business stands (e.g. gender pay gap reporting mandatory for companies with over 250 employees, but smaller companies should also know what their gender pay gap is)
- Keeping in mind what you are offering and to whom, e.g. if you are looking to attract senior profiles, do you have benefits in place that would be attractive to parents, such as childcare support or healthcare insurance?
- Don’t necessarily give everyone the same things; give them what they need.
Transparency is key, and employees need to understand what the business offers and what their options are. Policies in place in terms of compensation, benefits, flexible work, and processes around pay rises and promotion need to be clear. For example, if the policy of getting a pay rise isn’t transparent and the business works on a “don’t ask, don’t get” basis, it can seem unfair to people who simply don’t ask and could make those employees leave the business.
Giving people what they need is also a really good way of keeping the company’s culture as not all benefits will appeal to everyone.
How do businesses choose what benefits they offer?
The aim of having benefits is to keep your employees happy and attract talent, and you want your business to be sought after.
Benefits can come in all shapes and sizes. It can be things like gym memberships, flexible working or highlighting employees’ milestones with a prize.
Knowing who your employees are and what type of candidates you want to attract will establish what benefits you want to offer more easily.
For startups or scaleups, they want to attract the best people, but often, when a business is in the early stages, they might not afford the top percentile salary, so that’s when benefits come in.
An example of this could be when a person has two job offers, one has the top percentile salary but has a strict work in the office rule, whereas the other offer has a slightly lower salary but offers flexible working rule. People appreciate when businesses provide options, and offering more flexibility can more than make up for the salary difference.
“The main reason our company exists is that so many companies find it difficult to find the right benchmarks and comparables, and the challenge is that it’s not just all about salary. There’s stuff that comes into the equation, such as bonuses or stock options. It’s really hard to find not only the right level of pay but also the right structure of pay.”
General Manager @Payspective
Lastly, having your objectives and company values clear will also help determine the type of benefits you want to offer. Do you want to boost collaboration, productivity, retention, help people get to the office more often or promote a healthy lifestyle? Are you looking at seeking tax advantages, being market competitive or hiring in a specific geography? Your objectives and values will help determine your approach around benefits, and it won’t always mean spending lots of money. If you get it right, even a smaller budget can go a long way.
“When companies grow very quickly as PayFit has, there comes a time where it’s important to have a policy in place. We wanted to build a compensation policy that would allow us to promote three key points. One is in relation to fairness ensuring we had the same criteria for everyone, second is celebrate excellence and rewarding positive performance, and the third point is scalability as we continue to grow.”
People Manager @PayFit UK
Top tips when creating a compensation and benefits strategy
- Take your time to get your compensation policy right but do it earlier rather than later.
- Understand what employees want and what you want to achieve; you also need to understand your organisation to understand what an effective compensation system looks like.
- Evaluate the budget available. Look at market rates, benchmark yourself and keep it competitive for the candidates you want to attract.
- Match it with internal review processes to ensure you reward performance or any behaviour you want to see.
- Take into consideration your company’s values.
- Define the review periods and who is eligible for pay rises or the different benefits offered.
- Communicate the policy and be transparent. Employees want to know when they’ll get an increase and what the process is. Make sure it’s easy to understand.
Want to listen to the webinar in full? You can find it here, along with other interesting webinars we’ve previously hosted.
Ben is a global, fully automated, flexible benefits platform. With Ben, your team can choose benefits that matter most to them, for less than what you spend today and without the hassle.
Payspective helps startups and scaleups benchmark and optimise their compensation and diversity to attract, retain, and motivate the best talent.
“People very often underestimate or don’t take into account the cost of attrition. We estimate that having to replace an employee costs about nine monthly salaries. For many companies, their people are the most important asset they have, so getting pay, benefits and diversity right has an incredible value.”
General Manager @Payspective
Keen to find out more?
Interested in finding out how PayFit can help support your business’s payroll and HR processes? Why not book a demo with one of our product experts?