Is your compensation helping or hindering your business strategy? Talent is the fuel for your organization’s success, so it is important to know what impact your pay practices have on your people power. It may seem like a straightforward matter, but deciding what to pay your team members is a complex calculus involving a number of economic and geographic factors.
Thankfully for today’s employers, a compensation analysis is a useful tool to assess current salary structure and align team member performance with business goals. It is generally a best practice to conduct a compensation analysis every three years against market and industry benchmarks, but there can be other reasons for this exercise.
Six Signs Your Organization Could Use a Compensation Analysis
- Change in entity structure: If your organization decides to switch to a new entity type, benchmarking compensation is useful to manage pay and salaries during the transition. It may also be a requirement. A change to an S Corporation triggers the need for a Reasonable Compensation Study to remain in compliance with the IRS.
- Succession planning or leadership transition: With a “silver tsunami” of baby boomer retirements on the horizon, ensuring attractive and competitive compensation for key leadership roles throughout an organization is critically important to ensuring smooth transitions and preventing a drop-off in talent or institutional knowledge.
- Talent acquisition struggles: There are many factors that play into a candidate’s decision to take one job over another. Some of these are beyond an employer’s control, so it is important to maximize those that are, including competitive pay packages for your industry or geographic market.
- Integrating teams due to a merger or acquisition: It is a big challenge to merge two workforces or onboard new team members. That’s why it is critical to set clear expectations with regard to pay, job descriptions and duties. Trusting a third party expert, like RKL, to conduct a compensation analysis for the new or expanded organization lends an air of objectivity and credibility.
- Facility or geographic expansion: If your organization’s success leads to new facilities or offices, you’ll need to add to your workforce. Pay benchmarking can help gauge the impact of an expanded team on the bottom line and right size salary ranges and pay rates for the markets where you’re growing or entering for the first time.
- Talent retention and engagement: When employees are paid competitively and feel respected and valued, they are more likely to remain in a job and engage a more meaningful and productive way. A compensation analysis can produce valuable insights around pay that gives leaders the ability to develop better incentives and identify opportunities for additional engagement.
Our Workforce Strategies team is ready to put the power of analytics to work for you. Learn what to expect from a compensation analysis and what it will require of your team and explore our capabilities. If you’re ready to chat, contact us today using the form below to get started.