Compensation is likely your organization's biggest operating expense, and it’s important to track and optimize how it’s used. If allocated poorly, it has the potential to cause employee distrust, disengagement, and turnover. This could be detrimental, as 26 percent of the workforce is considering switching jobs in 2021.
A compensation analysis can help you use your budget strategically, so you can reward your employees fairly and consistently.
A compensation analysis is a review of employee pay in relation to an organization's pay philosophy. It often takes into account both internal equity and external competitiveness to ensure fair pay that can attract, engage, and retain talent.
The results of this analysis may identify team members deserving of a strategic compensation adjustment more aligned with company values or the law. Adjustments are often made during a forthcoming compensation cycle, in addition to any merit-based raises.
It’s a best practice to run a comprehensive compensation analysis once or twice a year, as new hire offers, raises, promotions, and acquisitions can all contribute to compensation misalignment. Identifying and addressing these issues on a regular basis can mean smaller and fewer adjustments over time.
Compensation analyses help organizations identify potential pay issues, so they can be corrected. This has many benefits, including:
The first step in conducting an effective compensation analysis is to review your salary ranges. You want to ensure they reflect your compensation philosophy and account for current market trends.
Then run a compensation analysis to identify any team members who may need your attention. Drill in to things like:
When you find and address compensation discrepancies, communicate about the changes with your team members. Employees should understand what they earn, why they’re compensated that way, and when changes take effect. A compensation statement can help with this.
A compensation analysis can ensure you’re managing your budget strategically to attract, engage, and retain the talent your organization needs to meet business goals. Work this process into your compensation cycle timeline so you’re able to make important strategic adjustments before merit-based recommendations.
An analysis can be a lot of work to complete comprehensively and correctly—but the right tools can help immensely. Compaas connects with your existing HR tech systems and gives you instant insights into total employee compensation so you can run an effective compensation analysis.