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Many companies want to reward their top-performing employees. Increasing the compensation of high performers provides an incentive for them to exceed expectations and continue to excel in their day to day work. Additionally, it makes them less likely to accept positions at other companies offering higher compensation and different benefits if they feel valued and respected. Let’s discuss compensation strategy for your business, and how to ensure success for your organization.

Resource and Budget Challenges

Resources are finite, and performance is relative. Understandably, most companies have a limited budget for annual increases in base pay (merit pay) or employee bonuses. For example if the merit pay budget is 3%, there are two extreme methods of distributing this budget:

  1. Give every employee a 3% increase in their base pay.
  2. Choose to give high performers a 5-10% increase and give bottom performers 0%.

Performance Drives Decisions

Most managers and department leaders, if given total autonomy on how to distribute a 3% merit budget, will likely give 4% to top performers and 2% to bottom performers. They truly want to reward high performers but are hesitant to give no merit increase to bottom performers due to the potential for attrition to occur. Employees who a manager wanted to fire are probably already gone, so the bottom performers who remain are typically seen as “okay” performers (not rockstars, but also not “bad” workers). Therefore, most managers are very reluctant to give bottom performers no merit pay or zero bonuses.

Compensation Strategy For Your Business

In the scenario above (as well as many others), it is crucial for companies to have a process and system in place to ensure that high performers receive more compensation than bottom performers. This strategy is essential and vital to attract – and retain – the best employees. If you are not sure how to proceed or have concerns on making the proper decisions, fractional HR services and consulting can provide the expertise needed to develop and implement these strategies effectively.

Compensation Strategy Services

At Preferred CFO, we specialize in helping companies develop and implement compensation strategies tailored to their needs. Our fractional HR services are designed to help businesses attract and retain top talent by creating a fair and motivating compensation structure for all workers.

The Preferred CFO Difference

Not all fractional HR companies like ours offer outsourced human resources solutions that are customized, flexible, and cost-effective, ensuring you have access to the best HR consulting and support without the overhead of a full-time HR department.

By partnering with a fractional HR provider like Preferred CFO, you can access a wide range of HR solutions already mentioned, but also tap into expertise around payroll, recruitment, onboarding and training, unemployment claims, and more. We truly believe that every company is different, and we strive to provide white glove HR solutions at the most competitive rates on the market.

Preferred CFO Fractional HR and You

Let us assist you in creating a compensation strategy that aligns with your business goals and keeps your top performers motivated. With our expertise in fractional human resources, you can be confident that your compensation strategy will attract and retain the talent you need to thrive for many years to come.

Contact us today to get started!

About the Author

Tom Applegarth Human Resources Expert Preferred CFO HR Outsourcing Fractional HR

tom applegarth

Tom Applegarth is a 30-year veteran in the Human Resources industry, with experience spanning manufacturing plants, retail stores, and divisions of Fortune 500 companies. Tom has HR experience across the United States as well as Europe, Asia, and Latin America.

His experience has brought significant, measurable improvements in employee engagement, attrition reduction, recruitment of the best and the brightest employees, and establishment of high-impact HR processes and improvements.

Tom has over 30 years of experience, including serving at high-profile companies such as Goodyear Tires, Belden, Potter Electric, and Young Living.

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