Archive for the ‘Reducing Compensation Costs’ Category
Ask most employees if they’d rather have cash or non-cash incentives, and they’ll choose the cash incentives almost every time. However, as an employer, you have many other factors to consider when choosing an incentive other than whether or not employees say they want it. Carefully consider the benefits and drawbacks of cash bonuses before creating your incentive program.
Benefits of Cash Incentives
- Nothing talks louder than cash – Many employers find that as soon as they offer cash incentives for a task, their employees start working harder. For fast, effective gratification, few incentives work better than cash.
- Easy to distribute – Cash incentives require little extra effort on the part of an employer to distribute. Money can either be added to a paycheck or distributed as cash.
- Practical – Many non-cash incentives appeal more to some people than others. While some employees may not need a new iPod or tickets to a sporting event, everyone can benefit from a little extra cash.
Drawbacks of Cash Incentives
- Can become viewed as base pay – When employees receive cash bonuses on a regular basis, they can come to expect them as part of their base pay. For example, many people rely on their annual Christmas bonuses or quarterly commission checks to pay their bills. If these benefits ever have to be taken away, things could get ugly fast.
- Disappears quickly – Cash incentives are often quickly forgotten because they are spent on necessities – things like bills, debt or Christmas presents. On the other hand, even small non-cash incentives like movie tickets, electronics or gift cards are remembered long after they’ve been received.
- Takes the joy out of incentives – Non-cash incentives often make a more positive impact because they are viewed as “treats,” while cash incentives are often seen as more practical.
The best incentive programs often involve a mix of cash and non-cash incentives. To show your employees how much their non-cash incentives are worth, consider total compensation statements through COMPackage.
A new report entitled, “2015 Workplace Flexibility Study,” surveyed 1087 professionals (employed and job seekers), and 116 HR professionals and found that 67% of HR professionals think that their employees have a balanced work-life, yet almost half (45%) of employees (35% of job seekers) feel that they don’t have enough personal time each week.
According to the report, sponsored by WorkplaceTrends.com, and CareerArc, giving employees the option to periodically work from home without coming into the office provides benefits to both employees and employers. “87% of HR leaders believe that workplace flexibility programs lead to employee satisfaction, while nearly 7 out of 10 HR leaders use workplace flexibility programs as a recruiting and retention tool.”
Most employers do not appear to be aware of how important workplace flexibility is to employees. Roughly 50% of employers ranked workplace flexibility as the most important benefit they believe their employees desire, compared to 75% of employees – who ranked it as the most important benefit!
But workplace flexibility isn’t only good for employee satisfaction. Employers also chalked up an increase in productivity, an increase in employee retention, and 54% said their workplace flexibility programs positively impacted their recruiting.
Total Benefits Reporting software tools like COMPackage.com, allow employers to really put a fine point on how workplace flexibility impacts an employee’s bottom line. The software has standard benefits reporting features such as charting the value of salary, bonuses, profit sharing, healthcare-related benefits, paid time off, and so on. Moreover, it has the ability to display, and value, custom benefits. For example, employers can show their employees the actual estimated dollar value of not having to pay for parking, gas, going out to lunch – even the value of the time saved by not having to spend 30 minutes twice a day commuting to and from work. While these things can be taken for granted, they can add up to thousands of dollars.
Employers not currently offering workplace flexibility might well benefit from taking a hard look at the hard dollars to be gained – both by the employer and the employees – in allowing employees to work from home. Workplace flexibility is clearly a burgeoning trend, and employers who don’t get on board might find themselves working harder than necessary to attract and retain top talent.
Basing compensation around your business strategy ensures that you reward employees for work that has great benefits to your organization and increases the likelihood that you meet your goals. However, aligning the two can be more challenging that it first appears. To make sure that they are actually linked, you need to start at the very beginning, analyzing what both mean and entail.
What Are Your Business Goals?
Your business strategy is the way that you intend to enable your organization to grow. You should be able to define your strategy through a few short sentences that detail your business goals. Examples include increasing sales with current customers, expanding your client base, growing your product line, and entering a new market. To determine your business goals, identify your current strengths and weaknesses and consider whether you are straying from your mission or company philosophy.
The next step is to create objectives for the next three to five years: a combination of short-term and long-term financial and non-financial goals. Your business strategy entails identifying methods to confirm that you are moving closer to meeting these goals, which will enable you to reward the employees who played a role. Such means may include increased sales, better cost management, higher customer satisfaction, or greater productivity.
Bear in mind that your business goals are constantly changing, often without you noticing. Revisit your business strategy frequently to realign it to your compensation strategy.
Types of Compensation
A big concern for many companies when they hear the word “compensation” is cost. In fact, there are plenty of ways to retain employees and increase productivity by using a compensation method that keeps expenses low. Some such examples are:
- Creating a positive work environment.
- Offering reduced working hours.
- Developing customized benefits for individuals.
- Providing group rewards in addition to team incentives.
- Offering deferred compensation, like unvested stock.
Whatever you choose should be relevant to your organization’s philosophy and support your business strategy. However, it is also important to talk to employees and find out what they consider good compensation, which will avoid workers feeling undervalued for their work.
One of the best ways to stay on track with your compensation strategy is to use Total Compensation Reports from COMPackage. Our solution is suitable for organizations of every size. It features customizable templates to enter your data and it calculates benefits according to your business strategy.
Contact us a COMPackage to find out more about how you can simplify your compensation statements while ensuring that your business moves in the right direction.
Profitability depends on increasing revenue, decreasing expenses, or both. Whether in good times or bad, decreasing expenses is always a good thing to do – unless it affects the quality of what you offer or your ability to sufficiently reward the people that make your company successful.
To compensate for company budget shortfalls, some executives choose to over-focus on saving pennies on things like single-ply toilet paper, eliminating employee lunches, charging employees for coffee, and so on; or, fixate on large, often counterproductive measures such as a less attractive health care plan. Typically, the greatest costs are associated with employees, and an understanding of employee turnover costs can be a revelation.
The Costs of Turnover
Company turnover costs don’t need to be hard to pin down, even though most employers have never taken the time to calculate the true cost of replacing a worker. These costs can be deceptive, but they are significant and avoidable. How significant? Anywhere between 25% and 100% of an employee’s annual salary!
Let’s look at the costs of turnover, which we can break into two categories: the costs associated with an employee leaving the company and the costs of replacing that employee. Of course, both sets of costs are incurred when an employee is replaced.
When an employee leaves a company expenses may include:
- the cost of performing exit interviews, changing passwords, etc.;
- severance pay and benefits;
- lost revenue due to lost productivity in the time when one employee is leaving and the other is being hired, trained and coming up to speed; and,
- clients lost due to continuity issues when an account manager leaves.
New employee acquisition costs can include:
- costs of using an internal or external recruiter;
- costs of ad placement for the job opening;
- cost of the new employee’s time for any interviewing process;
- cost of staff time to perform interviews;
- costs that are incurred when performing background checks;
- any inherent bonuses, compensations or other hidden administrative costs;
- costs associated with training new hires; and,
- the cost of carrying new hires while they are going through the training process.
There are also significant hidden costs, such as the intangible effects of stress a short staff puts on other workers and the loss of company knowledge.
All of this assumes the employee works out. A significant number of employees leave after only a few months, either because they receive a better offer (possibly from a job they were pursuing when they found you), they don’t like the company culture, they don’t like the work, or you don’t like them or their work.
How to Reduce Turnover
Often the best way to increase profits is to reduce turnover. Solve your turnover issues by focusing on sustaining a healthy company culture. Happy, productive workers are your most valuable assets. And let’s not forget the brand-value of happy workers saying good things in a community of peers and associates.
To reduce turnover, you want to examine exactly why employees are not happy – and then fix it.
- Are they feeling overworked?
- Is the work environment unsatisfying?
- Do they not fully appreciate their total compensation?
The first two may involve some surveying and internal soul searching. The last one is a problem easily solved by today’s inexpensive, online total compensation reporting solutions.
The Striking Value of Total Employee Compensation Statements
The tool that most effectively reduces turnover is . A good solution will provide a simple, one-page, graphic display of each employee’s total compensation, including everything from salaries to the cost benefit of free parking. Many employees are pleasantly surprised to learn how much their benefits add to their total compensation. This helps them be less likely to leave for salary or benefit reasons, and has them feeling more valued.
Reduced turnover always means higher on-going profits. Sustainable growth means stabilizing your workforce to cultivate steadily-increasing employee value as they become experts in the field and in their positions. To this end, don’t underestimate the value of total employee compensation statements. Consider this business advantage today.
In order to attract new employees and retain your best people, it works to have a competitive Employee Compensation and Benefit plan in place. Employees are looking for more than just the financial reward of a salary; to avoid losing excellent workers to your competitors, you need to consider offering them additional benefits. A compensation and benefits program is an ideal way to meet your staff’s wants and needs while a total compensation statement makes them aware of all of the value of your contributions.
Total Compensation Statements
Demonstrate to your employees the total value of the benefits program through total compensation statements. These provide information about the complete pay package an employee receives annually, including both direct and indirect compensation.
What to Include in a Compensation and Benefits Package
There are many types of benefits that any business should consider including in its benefits package:
When choosing the appropriate retirement plan, you should take into account your company’s needs as well as your employees’ wishes.
- SEP-IRA plans are ideal for small organizations as they are easy to establish and have no government filing requirements. Employers may make contributions of up to 25 percent of the total amount of their pay.
- SIMPLE-IRA plans are suitable for companies with up to 100 employees. Some administration is required. Employers may match employee contributions or designate a percent of workers’ wages.
- 401(k) plans are popular for their flexibility and higher limits for contributions; however, some require significant administration and annual filings.
Although health insurance can be quite expensive, it is something most employees are looking for in a company. There are a wide variety of plan options available, meaning you should be able to find something that is both affordable and meets your employees’ demands. Also consider offering healthcare through the defined contribution model, which gives you greater flexibility about how much you contribute and allows each employee to choose a plan that meets his or her needs.
Vacation Days + Sick days + Personal Days = Personal Time Off (PTO)
Set out a clear policy that allows employees to take time off when they need it. One week vacation per year served, up to three weeks off, is often thought to be a standard – plus some amount of sick days paid and some considered personal time off (could be in half days) for doctor appointments, family care, etc. Sometimes a competitively engineered program here can be a deal-maker in recruitment. Be creative, but don’t lose site of what’s important for the business.
One great program that we used to provide in my prior life, and our employees absolutely loved it, was Friday afternoons off between Memorial Day and Labor Day. But everyone had to extend their other weekday work to make the 4 hours off good. In our case, we had billability minimum requirements, so they had to still make that minimum. And you couldn’t take Friday morning off or that cost you an entire day off.
Help employees acquire further training in fields relevant to your business. You can offer either partial or full reimbursement for these classes. You would be amazed how important your best learners, who often can be your best employees, see this as an alluring benefit!
Take a look around your environment. What are you offering, or can you offer, to your employees that are, or would be, meaningful to them, which wouldn’t necessarily cost you more? Even things like free coffee and free parking have value. Or provide them a $50/month cell phone reimbursement, but for that they must be available by cell to your customers. Consider quantifying all of these in annual compensation statements.
Setting up a compensation program can be simple and inexpensive for your business. Whatever benefits you choose to include, ensure the focus is on providing employees with greater flexibility and value, and allows you to share the cost of fundamental benefits such as retirement plans and healthcare insurance.
Disclaimer: Any advice relating to finance, investments, companies, securities or any other financial matters whatsoever reflects the private opinion of the person giving this advice. It is not the advice of a financial or other expert. COMPackage, its employees and representatives take no responsibility for any consequences resulting from following such advice. Anyone seeking financial and/or investment advice is strongly advised to conduct their own research or consult a professional adviser. You are solely responsible for any decisions you make based on this information.
While economists are happy to report that the economy is looking up, your balance sheets tell you differently. Your business is in a slump and has been for several quarters now. You know that you need to make cuts somewhere, but where?
While employee benefits and incentives are crucial to a productive, happy workforce, sometimes they need to be trimmed to balance the budget. When you have to make the hard decision to cut incentives during a tough economic time, follow the tips in this guide to minimize impact on employees and recover as quickly as possible when the economy rebounds.
- Don’t fool yourself. Take a hard look at your finances and make a realistic decision about what you need to cut. Many companies start out by cutting out too little, ensuring a slow, painful death for the company.
- Be transparent. By showing your employees your financial situation and inviting feedback, you can help people understand why some of their benefits need to be cut.
- Make cuts from the least necessary benefits to the most necessary. While health and retirement benefits may make up most of your compensation package, your employees would probably agree that these are the most important benefits they see. Before you go after incentives that people depend on, try to cut out things that aren’t absolutely necessary like company parties, vehicle usage and education reimbursement.
- Start cuts at the top. Your management team probably enjoys the most benefits anyways, and when your employees see that their management has already made real sacrifices, they’ll be less likely to complain when they are asked to do the same.
- Reinstate benefits when the economy rebounds. Many times, when a company cuts matching 401(k) contributions or raises health insurance premiums, those benefits never come back. If you reinstate benefits as soon as your company gets healthy again, you’ll be able to show your employees just how valuable they are to you.
It is important to remember that we often tell our employees when we cut their benefits, but we rarely tell them what all of their benefits mean to them.
You can quickly and easily share with your employees how much their benefits are actually worth at any moment through total compensation statements. View a sample statement to learn more.
While you may not be able to offer your employees extravagant benefits like an onsite gym or a cafeteria with gourmet food, there are many simple things you can do to show your employees you appreciate them.
1. Say Thank You
A simple word of appreciation is not only free, it is also one of the best ways you can recognize an employee. You can say “thank you” for a job well done through a personal card or email, a few spoken words or a formal recognition program.
2. Provide Free Food & Munchies
People appreciate few things more than free food. Providing free snacks or drinks throughout the day can be a great way to keep employees happy. If you don’t want to offer free snacks every day, you could choose to have a donut day once a week or a pizza party once a month.
3. Start an Employee Wellness Program
Keep employees healthy through a wellness program. Some wellness program ideas are gym membership reimbursements, smoking cessation incentives or free flu shots. Not only do employee wellness programs keep morale high, they can also help cut down on costly sick days.
4. Small Gifts & Rewards
While you may not be able to afford to hand out big bonuses every month, you can probably set aside a few dollars for rewards like movie tickets or gift cards.
5. Paid Time Off
An easy way to show love to your employees is to give them time off for a job well done. You could even throw in an extra day off for their birthday or their company anniversary. Depending on your business needs, flex scheduling that allows employees the freedom to create their own schedule can be a valuable benefit.
Do you have any additional ideas for inexpensive employee benefits? Please leave them in the comments below — and thanks for sharing!
Show your employees the monetary value of their benefits through COMPackage .