Compensation problems can occur even in the best-organized and most human-oriented of companies. Even a minor compensation issue can affect employee motivation across the organization. If you ignore compensation issues, you could find that your employees are disgruntled and no longer want work for your business.
In order to do this, your human resource department must ensure that your compensation package is sufficient to keep your employees by making sure that wage-theft laws are followed. You should then go one step further and address any compensation concerns that may arise.
The human resources departments of businesses can face a wide range of compensation issues. This article will provide you with an overview of compensation issues and what HR could do to resolve them.
1. Retirement Plans & Relief Provisions
During financial crises, it is common to see employees in HR departments hurrying to their retirement plan. The retirement savings that they accumulate becomes their first source of savings for emergencies.
In an ideal world, retirement savings would only be touched by employees who are retired . Plan loans and hardship payouts are the two most common ways that people use their retirement savings when they are employed.
Here is a quick discussion on both:
- Employees who use hardship plans before age 59.5 will be penalized 10%.
- Plan loans should be repaid according to a schedule, as if they were not repaid. The same 10% penalty is applicable.
2. Internal Equity
Internal equity is the practice of paying employees within a single organization who have similar skills and positions the same compensation. Compensation includes the base pay as well as any other benefits or perks that are part of the job. Depending on where your business is located, you may need to invest in internal equity. If you don’t, you may lose your employees or be sued.
In many countries, equal work is compensated equally. You should check local laws to make sure that you are not violating them.
3. Pay Transparency
Transparency in Pay means that employees need to be aware of the basis for any wage changes, and how they’re calculated. It is important for employees to understand how their salary was calculated, even though employers are not required by law to disclose their employees’ salaries.
If an employee has any questions about their salary, they can ask their employer for a pay slip which breaks down the wage, benefits, overtime pay and deductions. The HR can ensure that the employer pays their employees in a transparent manner and prevent any misunderstandings or underpayment.
4. Competing for Talent
Businesses must have a team that is competitive to be competitive. Businesses must hire talent who is competitive at the beginning of the recruitment process. To attract talent , one way to do this is to use a pay and benefit scheme that is competitive.
Professionals who are currently looking for work want to know they will be paid commensurately with their experience, skills and work. If you do not show potential employees how they can earn a salary below the average, they are unlikely to apply for a position in your company. The HR department must offer a competitive rate of pay to attract qualified employees.
5. Geographical Differences
Virtual or remote work has brought to light the fifth issue, compensation. Many companies now have the ability to hire workers at different locations. Most of these companies are international. Working remotely is feasible as long there is an Internet connection.
Few employers are aware of geographic differences and the need to pay attention. The cost of living can affect the salary requirements for employees in remote work arrangements.
What do you believe? How will you calculate the salaries of these employees if you consider the geographical differences between them? How will your team understand the differences?
How can you compensate employees who work in countries or states with higher living costs? This is a question that should be decided by the upper management, as it can vary from company-to-company.
Conclusion
Some of the most pressing issues faced by HR managers and entrepreneurs alike are compensation-related, among the many other problems in business. It’s not easy to find a balance between making a profit and paying salaries. You will also have to deal with compensation issues, such as the ones mentioned above. Businesses can only be successful when their employees are happy and satisfied. You should address these issues as soon as you can to avoid your business being overwhelmed.