Organizations need to implement a base pay plan in order to avoid common compensation mistakes. Having a structured base pay plan, as well as a compensation philosophy, helps support an organization’s financial stability by attracting qualified employees, avoiding costly employee turnover and by motivating employees to produce outstanding results. One compensation mistake organizations make is neglecting to benchmark pay practices. Another is not differentiating enough between your top and poor performers when making salary adjustments.
Here are common compensation mistakes to avoid:
- Neglecting to benchmark pay practices
- Failing to align all the organization’s goals
- Using limited pay-for-performance differentiation
- Not calibrating performance management data
- Avoiding transparency in the pay system
- Moving too quickly
- Failing to empower managers
When pay practices are not consistent, employees may feel that they are not compensated fairly. They may think their compensation is not reflective of their qualifications and performance level. When it comes to pay for performance, there needs to be enough differentiation between pay increases among your top and poor performers. If everyone is getting a 3% increase, often referred to as the “peanut butter” approach, then there is little incentive for employees to improve their performance.
– Javier Gonzalez, Research Associate
CompTalk 