Top Three Common Compensation Policy Mistakes
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Top Three Common Compensation Policy Mistakes

Always at or, at least, near the top of employee wish lists, compensation policies and levels are also a common source of staff displeasure. In the 21st century, inequities in or insensitivity to compensation issues can blossom into expensive employee turnover or litigation, typically related to discrimination.

As seasoned HR executives are aware, some of the most comprehensive and erudite compensation plans “on paper” can cause equally complex problems in the workplace. Many veterans of the HR “wars” disregard phrasing compensation as “high,” ” low,” “strong,” “weak,” or any similar descriptive term. The most consistent rule is to describe compensation programs as “.”

While even the most sophisticated employers make mistakes, among the most repeated errors include the following issues.

1.  Using one generic job title to apply to multiple different duties and responsibilities–and compensating for the responsibility level. Whether this situation arises from laziness, by design or simple error, major workplace disruption can result. While it is smart business to compensate fairly for your market and staff responsibility levels you expect the employee to embrace, it is unrealistic to expect that co-workers, working under an identical job title, will express joy that a perceived peer receives higher compensation. Many forward thinking companies have created new 21st century titles to avoid this mistake. For example, some employers now have a CMO (Chief Marketing Officer), CCO (Chief Creative Officer), or COSO (Chief Online Services Officer) title to differentiate responsibilities from titles. Even in the C-level suite, smart employers try to avoid job title/responsibilities conflicts.

2.  Failure to relate incumbent compensation with levels offered to new hires. Some hiring managers become overly enamored with sought-after candidates and offer compensation that has little relevancy to the current staff earnings structure. Should this information become non-confidential–and it probably will–current high performing employees will become very dissatisfied with their jobs and their employer. As many companies have learned, assuming high achieving employees have few other job options (even in the current recession-driven market), over achievers always find better opportunities, if they so desire.  Also, let’s be mindful of potential for discrimination allegations.

3.  Implementing raises, bonuses, benefits, and performance rewards that may “suggest” discriminatory practices. While there are some strong federal regulations addressing the fairness of formal benefits, outside of some formidable union contracts, there are few mandates regarding salary or incentive rewards. However, regardless of how confidential individual compensation records may be, information can spread at the workplace. Those raises, bonuses or incentive awards that “appear” to be arbitrary, or smack of unwarranted “favoritism,” can cause major disruption in the company.

Management must communicate openly with staff regarding their compensation policy. Fairness with and adherence to the policy is just as important as its individual components. Mistakes will still be made. Minimizing potential errors, however, is both possible–and crucial–to a contented, high performing staff and operational efficiency.

Source: http://www.worldatwork.org/waw/adimComment?id=43777

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