Without question, cash is the most common (and many would argue the most important) form of compensation. Each year, most employees look forward to increasing their income. The general thought is that after 12 months of good work, an employee is entitled to a raise. This raise is expected to reflect the value the company places on the individual receiving it—or something like that.
Sometimes, however, no matter how well an employee performs, the employer may not have the capacity to give the employee the raise he thinks he deserves; other times the employer can and should. Either way, an employee’s pay and potential raises are only a part of his overall compensation.
Indirect versus direct compensation
There are two types of compensation: direct and indirect. Direct compensation consists of things like cash money and bonuses; indirect compensation consists of things other than cash money, including benefits, rewards programs, and long-term incentives. Indirect forms of compensation are becoming more and more popular. Good group benefits or paid leave policies can often make up for what might otherwise be seen as pay deficiencies.
Leveraging nontraditional indirect incentives
In addition to their standard indirect forms of compensation, more companies have started using various reward or point systems. Points earned for good performance can later be used by the employee to redeem all sorts of gift items, travel perks, or even additional days off from work.
Incentives keep employees engaged and feeling rewarded for a job well done. Managers are usually allotted a certain number of points or rewards to distribute amongst their employees accordingly. Sometimes managers will organize competitions; other times they may choose to disperse points depending on the employee’s efforts to go above and beyond.
Understanding your employees
As an employer it’s important to understand your workforce and what motivates them. For example, giving extra time off to employees who don’t generally use all their normal time may be cost effective but could leave those employees feeling undervalued, because they have a benefit they’ll never realize. On the other hand, employees who use most, if not all, of their time will probably view more paid leave as a hugely beneficial form of compensation.
By gaining a good grasp of your employees and the different types of compensation likely to leave them feeling appreciated, you’ll have the ability to leverage various resources and tailor your compensation to specific individuals or groups of employees. In addition, personalizing compensation plans shows that you pay attention and genuinely value your employees and the good work they do for you.