Hiring team members can produce a mixed bag of emotions. You’re excited to find a person that can level-up your current team (or just yourself)! You’re also nervous. How can you put together a competitive compensation plan that makes that candidate want to join your team? There are many things to consider, but most importantly you’ll want to assess their compensation structure.
Compensation used to be considered just how much you were getting paid. This has evolved as new generations enter the workforce and expect more out of their employers while employers continue to compete for these skilled workers. Types of compensation now include a multitude of different factors, each as important as the next. You’ll want to consider all of these in order to win the employees you’re after.
Your employee compensation will cover your monetary payments to this employee. Consider whether you want this position to be an hourly rate or salaried. If this employee will work the same number of hours every week, it may make the most sense to pay them with a base salary. If the position is mostly shift work, or scheduled on a week-by-week basis you’ll likely want to pay them an hourly rate.
Whichever you decide will impact the rest of your compensation package. For example, if your employee is working more than 30 hours a week (or 130+ hours a month), you’ll be required to offer them health care. Similarly, if your employees are salaried, you’re typically not required to give them overtime pay for working over 40 hours a week.
Once you’ve decided on an hourly vs salary base pay structure, you’ll also want to explore a bonus structure. Will you offer bonuses tied to company metrics? If so, consider how their role can contribute to those metrics and make sure how they can earn the bonus is very clear to them. Keep in mind, you can offer spot bonuses as well for employees who are doing great work or going above and beyond, but those don’t need to be outlined in their compensation package.
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Benefits as Part of Compensation
Federal regulation states that if you have more than 50 employees, and those employees are working more than 30 hours a week, or 130+ hours a month, you’re required to offer them benefits. Your health care coverage can vary and you can choose to offer health coverage, or include dental and vision benefits as well.
Health Care Coverage
Your health coverage can vary, you can use private options available or the government has also created the Small Business Health Options Program (SHOP) which you can use to offer your employees health and/or dental insurance. If you’re feeling overwhelmed by the idea of reaching out to an insurance broker, the SHOP program is a good alternative for you.
Once you’ve decided on an insurance plan, you’ll need to decide how much you’re going to contribute to their premiums, and if you want to offer coverage to their dependents. Last but not least, you’ll need to decide how long your new employees will wait before they’re able to enroll.
Retirement plans available to your employees are also part of the total rewards they’re likely looking for. Depending on your payroll provider, turning on a 401(k) plan may be a breeze. You’ll want to consider if you’re going to contribute to your employee’s retirement fund and at what percentage (or dollar amounts) you’re willing to do this. Some companies will also use their employee’s retirement funds to participate in profit sharing programs, where they take the year’s profits and divide them up to place them in each employee’s 401(k) account.
Paid Time Off (PTO) and Sick Leave
How you’d like to structure your employee’s paid time off will also be part of their total compensation package. You can choose to offer them unlimited PTO, 80 hours of vacation time that is accrued through every pay period, or anything in between.
Many states are requiring sick leave to be part of your employee’s compensation. How your team members accrue the sick time varies state-by-state, but you’ll want to be sure you’re following those regulations. Besides being a requirement in some places, you won’t want your employee to come in to your business while sick and risk the health of your team!
Equity is on the rise. Better known as stock options, most employees want these precious shares and most business owners work them into team member compensation. How many you give, and how employees earn them are all up to you to determine.
As you look at your compensation package, there are some creative options you’ll want to consider.
Depending on where your company is located, providing commuter benefits for your team is an impressive perk. For example, if you’re located in a metro area where parking is scarce, you might offer a parking space in a parking garage, a stipend to pay for their own parking, or even offer to cover train passes and encourage folks not to drive their own cars to your building.
Not every employer offers life insurance policies to their employees and this could be an extra perk for your employees that would increase their compensation packages without adding significant cost to your business. Your health insurance brokers can help you decide on the plan that is right for your team, should you decide you’d like to offer this as part of the compensation for your team.
Learning and Development
Employee compensation that includes employee growth will also go a long way in terms of their compensation package. You can get quite creative here in determining a dollar amount you’re willing to contribute to career development programs they can participate in, certifications you’ll pay for, or even educational conferences you might like your team members to attend. These all count as part of their compensation and your business will also benefit from their learning and development.
Employee Assistance Programs (EAP)
Employee Assistance Programs (EAP) are another benefit that could set your business apart as not many employers take advantage of these as a part of their compensation package. These are work programs designed to help employees navigate through their personal problems. What kind of personal problems or issues? It’s wide ranging, but to name a few:
- Marital problems
- Financial problems
- Emotional problems
- Family issues
- Substance or alcohol abuse issues
They can also help to cover basic legal assistance, adoption assistance, and offer wellness programs.
Employee compensation has come a long way since the days of simply cashing your paycheck and climbing the corporate ladder. When you put together a compensation package, you’re really selling that candidate on the total rewards that being an employee of your organization has to offer. Aside from being able to market a holistic view of what you offer, continue considering how you can improve. You’ll want to consider any item an employee benefits from that is a cost to the business.
If you’re not sure what you can afford outside of a base salary for your employees, we can help. ScaleFactor can get your finances and accounting on track so you can focus on finding the right candidate and putting together the perfect offer for them. Learn more about how you can make these changes today.