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It’s a fact of life that most people have to work for money. Even people who love their jobs likely would not perform them free.
To a company, the salary budget is its biggest expense. To employees, it is a reward system for their work performed in your company and for the skills they bring to the workplace. It is also communicating to your employees what sort of work ethic, skills, and attitude are rewarded at your company. So, when a company determines how salary rewards administration is structured, including wage rates and for what and how employees will be rewarded, those decisions are critical “make or break” decisions.
Today, every company is a performance-based company and as such needs to learn how to use what salary budgets it has for maximum effect on employee performance while still ensuring equity within internal and external components and avoiding compliance problems.
Before you get started, keep in mind that adopting a competitive, performance-based pay philosophy requires some extra work. Because a merit matrix connects performance to market rate pay. However, in order to differentiate wages based upon the results of your employees, you need to know what you want people to do, be able to sort out how they are performing and, based on that, differentiate their pay. The merit-based, pay-for-performance matrix also serves as a guide for supervisors so that they suggest pay increases that are fair and support business objectives.
When your supervisors determine which employees will get pay increases and how much they deserve, they are making or breaking your business. How? By connecting performance to pay, or not, your managers tell your employees what sort of work ethic, skills, and attitude get rewarded at your company.
If you are not already using Merit Based Compensation, you may want to consider creating a merit-based performance matrix (MBM). The merit-based, pay-for-performance matrix serves as a guide for supervisors so that they suggest pay increases that are fair and support business objectives. The merit matrix connects performance to market rate pay.
The benefit of your extra effort regarding compensation is that you can drive your funds towards rewarding high-performing employees and send the right messages regarding what your company really rewards.
Teri Morning, MBA, MS, specializes in solving company "people problems"