Compensation management is a strategic task in human resources management. It comprises the planning, control and administration of employees' Compensation & Benefits and the development of salary structures within the company. Find out how successful compensation management works in this article.
The aim of compensation management is to make a company competitive by attracting, motivating and retaining top performers. Compensation management software that provides a clear overview of salary and bonus distributions and enables budget control across all departments, divisions and employees is helpful.
Characteristics of successful compensation management:
With a sophisticated compensation strategy, a company can differentiate itself from the competition and position itself uniquely. This means that successful compensation management is:
- Flexible and easy to manage
- Financially feasible for the company
- Motivating and enabling additional profits
- Accepted and understood by employees
Salary components and variable employee compensation
It is quite common for employee compensation to be made up of variable components in addition to the fixed salary. The basis for this is regular employee appraisals, in which the focus is on the performance and development assessment of the respective employee. Depending on the outcome of the performance appraisal, an individual salary adjustment, bonus or promotion may be the result. The development assessment can also be used to derive other funding opportunities, such as further training or taking on new tasks.
In addition to salary, however, more and more so-called fringe benefits are also playing a role in employee compensation. Fringe benefits are additional, voluntary company benefits that have a positive effect on gross salary. This means, for example, subsidies for retirement provision, fuel vouchers, tickets for events, memberships in gyms, etc.
5 Tips for Salary Discussions with Employees
- The salary discussion should be based on the financial year and the rhythm of any target agreement discussions in order to establish the connection between salary changes, company successes and personal performance.
- If there is a works council in the company, it must be involved in the remuneration process in good time. The right of co-determination relates primarily to the principles of distribution, but not to the level of wages.
- Please note that in addition to the employee's individual performance, possible collective bargaining agreements and corresponding works agreements or company guidelines or individual contractual agreements always apply. These can also have an impact on employee compensation.
- Before salary discussions begin, set the average percentage of compensation increase as a binding guideline. In this way, you avoid unpleasant surprises at the end of the salary rounds about the total amount of the newly agreed wages.
- Plan additional budget for unscheduled salary adjustments. Otherwise, promotions, for example, can tear a hole in your budget that the other employees have to suffer from.
Christoph Herzog
Editor: Haufe Talent
Christoph Herzog is interested in people and how they can work better together in the digital age. He is an editor at the Haufe Group, father of a daughter and likes to walk on narrow paths.
