Every year, Payscale puts out a Compensation Best Practices Report. This year, they reported some scary employment compensation data: while 73 percent of companies believe they pay fairly, only 36 percent of employees report that they’re being fairly paid. That’s a huge
discrepancy. And for five years in a row, employees have cited low pay as the top reason they left their organizations. What makes all this a little crazy is that fewer than half the companies surveyed have transparent compensation data. So how do either organizational leaders, or employees, even know whether they’re being fairly compensated?
There are a lot of sources for compensation out there, some of which is hearsay, rumor, conjecture…. Employees read about the $26 million-a-year CEO who is fighting a raise in the minimum wage and they start worrying that they’re getting a raw deal. Or they may learn that people in their positions in other companies or cities are getting paid twice as much as they are. But they don’t factor in the cost of living in that city, or the bar their counterparts had to meet to get that salary.
Talk about fuzzy math
Compensation isn’t just salary, as any organizational leader knows. It’s insurance, bonuses, stock options, paid leave and more. All that other stuff is known as the hidden paycheck. If you’re not really on top of what compensation should be, and transparent about how you got to your numbers, you are leaving your employees to decipher on their own whether they’re getting a good deal. Then when they come and tell you they got an offer of $10,000 more from another company, you’re tempted to bump their salary then and there to keep them. In reality, the compensation package at the other company may actually be commensurate with yours.
No organizational leader who is focused on success would rely on this kind of shady data on a question like how they’re doing in the market, or what their numbers are. You would never trust an internet search of crowd-sourced information as the sole factor in determining whether to create a new product, or open an office in a new city. In those situations, you understand that you’re about to make an investment, and you want to be sure you’re making it on factual, current, relevant information.
Did you even factor that in?
Your people are your biggest investment. Isn’t that worth the same treatment? Compensation experts have innumerable sources of market information. They have algorithms and insight to slice and dice that data so that it actually means what it says it means. Their data’s been scrubbed. They know how to factor in the existing and projected labor markets, temporary bubbles, cost-of-living and other types of compensation ranging from bonuses to memberships at a health club or extra vacation days. They have compensation ideas and information you probably never even thought of. And they’re experts at offering the right compensation for your employees. In other words, it’s a poor use of resources to hire professionals to give you data on sales but not give you correct data on compensation.
It costs three times as much to replace an employee as it does to keep them. And sometimes, all it takes to keep them is showing them that you’ve invested in ensuring you’re compensating them fairly in the marketplace.
We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business, with offices in Austin, San Antonio, Dallas and Houston. Contact me at Caroline@valentinehr.com or call (512) 420-8267.