Attractiveness To Employees

Compensation? Do Tell!

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What do employees want to know about compensation?

Close-up Of Businessman Hands Giving Cheque To Other Person In Office
Andrey_Popov/Shutterstock

What makes compensation effective? Employers, do you really want to know? The secret is that employees just want to know. They don’t necessary want to know everyone’s wages but they do want to know how the compensation system works in their organization.

Most organizations are afraid to talk about compensation. It is almost like politics and religion, which are not usually talked about in public. However, like any topic that is not discussed in the workplace, misinformation breeds like a wildfire. Misinformation leads to assumptions and workplace assumptions are usually incorrect, which can lead to organizational frustration.

A study by Peter LeBlanc shows that effectively communicating your compensation system will benefit your organization.

Click here to read about the study.

According to the study, the best way to communicate your compensation systems is to, “Keep it personal, interactive and it is best presented one on one from the employees direct manager.” Furthermore, the study also found that “…at all income levels…the more knowledge our study participants have about their pay system, the more likely they are to be satisfied with their pay and engaged at work.”

The shroud of secrecy over workplace compensation needs to be lifted, and open one-to-one communication encouraged so an employee’s supervisor can pave the way.

Discussion Questions

  1. If information about compensation is best presented to the employee by their manager, what role can HR play in supporting the communication roll out strategy?
  2. Develop an outline of a training program for managers to discuss compensation with their employees.

Creating Strategy With Criteria

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Wooden stool
Vladislav Gajic/Shutterstock

As we have learned through our studies, affordability, legality and employee attraction are three criteria which must be met in order for any compensation strategy to be successful. If a compensation strategy is developed which is not affordable, it will not work. If it is based on shaky legal principles, it will not work. If it is not attractive to the employee marketplace, it will not work. Like the three legged stool, each of these elements must be in place in order to create and support a sustainable system for future success.

Of these three criteria, affordability must be considered in the context of the employer’s overall financial obligations and opportunities. The compensation plan is one piece of a monetary puzzle that the employer must piece together as part its overall revenue and expenditure plan. Financial obligations on the part of many employers include significant loans from financial institutions to cover items such as start-up costs and on-going operational requirements.

With this in mind, Social Capital Partners in Ontario have implemented a ‘Rate Drop Rebate’ program that supports the development of affordable compensation, by providing a rebate on the interest rates for employer loans or lines of credit. This program is only available in three Ontario municipalities at this time.

Click here to see a CBC interview with Bill Young explaining the benefits of the ‘Rate Drop Rebate’ program.

Click here to see how the program works for employers.

This program also addresses the second criteria, legality, by ensuring that appropriate recruitment and selection procedures are in place when making hiring decisions. As for the third criteria, employee attraction, this seems to be the strongest focal point for this program. The targeted employee marketplace for hiring through this program includes students with limited work experience, long-term and older unemployed persons, people with disabilities, newcomers to Canada and unemployed indigenous people.

This program offers evidence that a sustainable compensation strategy can be implemented by ensuring that each one of these three criteria is taken into account.

It also provides evidence that these criteria can support employers in the creation of social good.

Discussion Questions:

  1. After reviewing the link for the Rate Drop Rebate program, what types of recruitment strategies are in place that support employers?
  2. Why do you think the Rate Drop Rebate program should be used in other municipalities?
  3. As a Compensation Specialist, what are the risks and rewards that this program could offer your current workplace?