In the very dynamic and ever-changing corporate world of business and finance, it is the goal of every company to attract and retain the best personnel. In this regard, one of the biggest tools companies have at its disposal is its compensation package.
Here at The Kelley Financial Group, we have worked for years with businesses across Pittsburgh, Pennsylvania to help them formulate personalized strategies regarding compensation. This has helped them make pivotal choices and maintain highly qualified and motivated individuals as part of their organization.
What Is Executive Compensation Planning?
Executive compensation planning can be defined as the development and implementation of a compensation strategy aimed at supporting a company’s financial goals, ambitions, and business strategies by addressing employees’ remuneration requirements.
There is often a gap between what employer’s think is fair compensation and what employees think they ought to be paid. A well-thought-out compensation plan will try to reduce the size of that gap and bring both parties closer together.
In terms of attracting and retaining a talented, happy, and motivated workforce, salary packages are the top priority. However, there are other ways to go about this besides offering high remuneration packages. These include:
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Bonuses
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Healthcare plans
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Retirement packages
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Time off and good working hours
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Career growth and development opportunities
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Fitness plans
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Provision of meals
Benefits of Top-Level Executive Compensation Planning
The importance of the right compensation plans for the health of a business can never be underestimated. Therefore, the biggest companies invest millions annually in a variety of incentives aimed at keeping a healthy workforce.
With the help of our experienced financial planners, businesses can work to improve the following:
Motivated Employees
When employees can see their value to the company being reflected in their compensation packages, they can remain motivated as they aim to further demonstrate their worth. A common strategy is to provide packages that are directly related to employee performance.
Increased Productivity
Productivity is directly linked to employee motivation and satisfaction, especially in organizations that deal with sales, where studies have shown that happy workers regularly achieve better sales figures.
Attract Top Talent
The competition for top-level talent is fierce, but with the right compensation planning, even a small business fighting against larger multinational companies can retain a good workforce. Employees, generally, care more about being valued rather than just working for a big company.
Operate Within Means
One of the most common reasons employers give for not being able to meet the salary demands of their employees is that the business simply cannot afford it. While this may seem the case, by implementing a tailor-fitted compensation plan, a company can find other ways to improve employee satisfaction.
Two Types of Executive Compensation Plans
The first step to creating a great compensation strategy is to understand the different types of plans that can be implemented. While compensation plans can vary greatly according to country and the specific industry, they can generally be divided into two types, which are:
Direct Compensation
Direct compensation refers to financial (monetary) incentives offered by to company to employees. It normally includes hourly wages, salary, commission, and bonuses. This is usually the first thing employees look at when considering a job position.
Indirect Compensation
This type of compensation, while still adding financial value to an employee’s package, does not provide direct monetary incentives. In many organizations, this form of compensation is regarded as employee benefits.
While indirect compensation varies greatly from company to company, the most common types are equity packages, stock options, time off, benefits (health, life insurance, and retirement plans), career development, parental leave, company vehicles, and meal plans.
Steps To Implementing a Compensation Plan
1. Back To Basics
The first thing prospective employers need to do is to take an overview of the basic workforce requirements of the business. At this early stage, it is important to focus only on the essential positions needed to run the business properly.
Once all these positions have been identified, a clear picture of the company structure will begin to emerge.
2. Individual Job Descriptions
It is important to have a clear job description for each position. Having two secretaries, for example, does not mean they will execute the exact same duties and be paid the same salary. This means that every single position must be identified and clearly defined.
A great way of determining different job descriptions is by looking at other businesses in the same industry that has been in operation for a while.
3. Appropriate Remuneration
Looking at how much other companies are paying employees in the same positions will help a business estimate how much it will need to offer to attract and maintain the desired workforce.
At The Kelley Financial Group, we have an in-depth knowledge of the different salary profiles of various Pittsburgh businesses. This knowledge will help our clients be able to offer competitive packages to prospective employees.
4. Overtime Considerations
A huge chunk of a company's remuneration budget goes towards overtime allowances. Therefore, it is important for businesses to take careful consideration of which positions if any, will most likely require overtime benefits, and if so, how much overtime is likely to be required.
5. Benefits and Incentives
Each employer provides different benefits to their workers and a company needs to identify which type of incentives it will be able to provide. In most cases, benefits and sales are industry-related, for example, employees working at a college may expect educational benefits for their children.
6. Employee Presentation
The way salaries and benefits are presented to employees will have a big effect on how they are received, which is something companies need to investigate before holding discussions with employees.
The Kelley Financial Group Can Help
A good executive compensation plan can be the make-or-break of a company, especially in the highly competitive Pittsburgh, Pennsylvania environment. The advisors with The Kelley Financial Group are here to assist companies wanting to remain competitive by retaining a highly talented and motivated workforce.
This material was prepared for The Kelley Financial Group’s use.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
The Kelley Financial Group and LPL Financial do not offer tax or legal advice or services. We suggest that you discuss your specific situation with a qualified tax or legal advisor.