Performing Compensation Reviews
Performing Compensation Reviews involves the systematic evaluation of employee salaries, bonuses, and other benefits against market rates, organisational goals, and individual performance. This process ensures that compensation is fair, competitive, and aligned with the company's strategic objectives.
Goal
The goal is to retain talent, motivate employees, and ensure equity within the organisation by systematically adjusting compensation to reflect market trends, company performance, and individual contributions.
Context
It can cost up to 150% of an employee's salary to replace them, making it crucial to retain top talent through competitive compensation. One often cited reason for people to leave a job is that they can get better pay elsewhere. Compensation reviews help ensure that employees are fairly rewarded for their contributions and that the organisation remains competitive in the market.
Inputs
| Artifact | Description |
|---|---|
| Internal Comparison | Analysis within the company to ensure equitable compensation across similar roles. |
| External Benchmarking | Reviewing compensation data from industry surveys, reports, and competitor insights to determine market rates. |
| Performance Reviews | Comprehensive assessments of an employee's performance, including achievements, contributions, and areas for improvement. |
| Product Budget | The financial resources allocated to the product, including budget constraints and funding availability. |
Outputs
| Artifact | Description | Benefits | Frequency |
|---|---|---|---|
| Updated Compensation Packages | Adjusted salaries, bonuses, and benefits based on the review outcomes. | Ensures fair and competitive compensation; aids in talent retention and motivation. | Annually or semi-annually, as determined by organisational policy. |
Anti-patterns
- Lack of Transparency: Failing to communicate the criteria and outcomes of compensation reviews clearly to employees.
- Neglecting Market Trends: Ignoring external market compensation trends, risking competitiveness and talent retention.