Compensation (General)

One of the most difficult challenges for a boss is determining the right compensation for each staff member. Since payroll is one of the biggest operational expenses for a company, determining a ‘compensation philosophy’ can impact success. The philosophy is simply how the company’s compensation structure compares to the market. Paying the highest relative to the industry is not necessarily the best course since it can be a major burden on the company. Paying below market will not attract the best talent.

Compensation can be viewed as both fixed cost (base pay) and variable cost (incentives/bonuses). Finding the right base range structure requires considering:

–   How competitive is the current job market for this position (supply and demand)?  A company needs to both attract and retain employees.

–   The company’s reputation – Generally, the better the reputation, a lower base can be offered (it also depends on the job market).

–   The impact of hiring new employees at salaries higher than longer tenured peers.

In accordance with the Fair Labor Standards Act (FLSA), employees must be categorized as either non-exempt (hourly) or exempt (salaried). The term ‘exempt’ comes from the regulation requiring payment of overtime. There are strict regulations regarding overtime, and this is one area where many companies run into trouble. Basically, companies must ensure that employees are classified properly, and non-exempt employees are compensated for all hours worked. Here’s a page link to a good exempt/non-exempt tool.

A good boss understands her company’s compensation philosophy and FLSA rules and is able to communicate it in a positive fashion to her staff.  She should also know where her staff stands relative to similar positions in the company, and challenge any perceptions of inequity. Employees who feel under-appreciated, and especially under-compensated are high retention risks.

There are several websites for researching base compensation for specific positions. Some of these sites are listed below. Recruiters are also a very good source of compensation data since they are placing candidates in similar roles real time.

See also Compensation (Incentive).

  1. Creating a smart compensation plan (Entrepreneur).
  2. Overview of employee compensation.
  3. Understanding the Fair Labor Standards Act (U.S. Dept of Labor).
  4. Compensation data and information from the National Compensation Survey (U.S. Dept of Labor).
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15 Responses to Compensation (General)

  1. Alfredo says:

    Wow crazy you posted this topic. I have worked so much overtime recently. During the month of May and half of April, I weorkd 5 all-nighters as in 30+ hour shifts And I work in IT building server racks. We simply had incredibly unrealistic deadlines that we had to meet with minimal man power. It without-a-doubt takes a toll on your body, but I am still pretty young so it’s not a huge deal for me. The money Wow the money is amazing.. and extra $100 to my 401K and an extra $500 cash for three paychecks straight! And that’s after tax dollars!For me, sometimes I jump at the opportunity, sometimes I’m like NO ! All depends on how much I have been working, what else I have going on, etc

  2. Rosa says:

    My employer gives out OT peahprs 3 times a year. And they didn’t like doing that if they could avoid it.Now, there is no OT because of massive budget cuts No pay raises this year, even if you deserved one by working hard. And, we are getting 12 days without pay soon for the entire year. Overall, it’s not looking good where I work other than we do still have a job for now.

    • HR Advisor says:

      Rosa, many companies are going through the same pain. Some that have not been able to manage budget cuts and find new sources of revenue have gone out of business, and then everybody loses. Hang in there or look elsewhere, but be sure to check-out the financial strength of a new prospective employer. You might jumpout of the pan and into the fire. Good luck!

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    I simply couldn’t go away your website before suggesting that I really enjoyed the standard information a person provide on your visitors? Is gonna be again steadily to inspect new posts

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    Ok, enough said. This was probably the best article I have read on Compensation (General) | bossdepot.
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