Optimizing Your Organization with Jason Buchanan
Welcome back to our ongoing discussion of alternative methods of compensating employees! Last month, I left you with a little “food for thought”…your compensation program should indicate to both current and perspective employees how they are valued, not how they are paid. Essentially there are two types of compensation: direct and indirect. Direct methods of compensation include the typical programs we all know and love:
- Basic Pay: Cash wage paid to the employee. Paying a wage, either hourly or salary, is a standard practice, therefore, your only real competitive advantage can only come by paying a higher amount.
- Incentive Pay: A bonus paid when specified performance objectives are met. Has the ability to inspire employees to set and achieve a higher performance level and is an excellent motivator to accomplish goals.
- Stock Options: A right to buy a piece of the business which may be given to an employee to reward excellent service. When an employee owns a share of the business, they are much more likely to go the extra mile for the operation.
- Bonuses: A gift given occasionally to reward exceptional performance or for special occasions. Bonuses can show an employer appreciates his/her employees and ensures that good performance or special events are rewarded.
Because laws vary from state-to-state, I purposefully do not address things such as insurance, health saving accounts, medical/dental, etc. Some compensation elements are required by law: social security, unemployment and disability payments. Other elements are up to the employer and can offer excellent ways to provide benefits to the employees and the employer as well.
In a tight labor market, indirect compensation becomes increasingly important. Businesses that cannot compete with high cash wages can offer very individualized alternatives that meet the needs of the people you want to employ. Such creative compensation alternatives are the small business's competitive advantage.
Indirect Compensation Alternatives
- insurance (health, dental, eye)
- paid leave (sick/holiday/personal days)
- tickets to events (ball games, concerts)
- magazine subscriptions
- boots and clothing
- laundry service
- company parties
- use of company vehicle
- cellular phones/pagers
Next month, we will finish our journey through the world of compensating your employees. Specifically, I want to highlight some programs that have worked in all sectors of business from manufacturing and production, to IT services, and even social service agencies. As we part this month let me leave you with this thought; you can have the greatest product at the best price, but if a customer has to endure an employee who is unhappy, what kind of ambassador are they for your organization?
For more information, please visit Jason's TNNWC Bio.
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