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:
- Give every employee a 3% increase in their base pay.
- 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
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.
You may also be interested in...
Top 5 Benefits of Outsourcing Human Resources
Outsourcing has become a popular strategy for businesses looking to streamline operations and maximize efficiency. Outsourcing human resources (HR) can be a great advantage for growing companies trying to manage an expanding employee base. When it comes to managing HR...
Maximizing Shareholder Value through Effective Capital Allocation
Effective capitalization strategies are crucial for businesses to ensure they have the right balance of debt and equity to support their operations, growth, and financial health. Strategic capital allocation is a major factor in ROI improvement and enhancing shareholder value.
Leveraging Financial Ratios to Assess Company Performance
Overview Financial ratios are crucial tools for any business or investor looking to assess the financial health of a company. These ratios provide insights into various aspects of a company's operations, such as liquidity, solvency, profitability, and efficiency....
Exploring Different Financing Options for Business Expansion
Exploring different options for business expansion is essential for companies looking to thrive in today’s dynamic business environment. By expanding their businesses and benchmarking financial performance, entrepreneurs can unlock new opportunities, drive sustainable growth, and achieve their business objectives.
Why Preferred CFO’s HR Solutions Trump Corporate Giants
In the complex terrain of human resources solutions and payroll management, corporate giants like ADP and Paychex are often the go-to for their seemingly comprehensive solutions that cater to businesses of all sizes. Yet, the reality for many clients is a growing...
Business Budgeting Essentials
Crafting and implementing an effective business budget is a dynamic and ongoing process. With a strategic and adaptable budget, businesses can enhance financial stability and pave the way for sustainable growth.
Tax Planning Strategy For Small Businesses
Business Tax Planning Strategies:A Small Business Owner's Guide to Savings & Compliance Effective tax planning isn't just about minimizing liabilities; it's about strategically positioning businesses for long-term success. From small enterprises to larger...
Financial Advice for the New Entrepreneur
Profitability is not just a financial metric; it’s a mindset that should permeate your business operations. By prioritizing profitability, you can grow your startup into a financially stable and sustainable business that can weather economic challenges and thrive in the long term.
Guide to HR Outsourcing: Strategies for Modern Business
HR Outsourcing for your business In this dynamic and ever changing business landscape, the questions of "What is HR outsourcing?" and “Do I need a fractional HR team?” have become increasingly relevant. HR outsourcing is a strategic practice that involves delegating...
Managing Business Expenses in Inflationary Times
Inflationary times pose challenges, but with strategic expense management, businesses can navigate these periods successfully. By understanding the impact of inflation, implementing cost-cutting measures, engaging in strategic financial planning, and embracing sustainable practices, businesses can not only weather economic storms but also position themselves for long-term success.
Why You Need Fractional CFO Services in 2024
Why You Need Fractional CFO Services in 2024 In the fast-paced, ever-evolving business environment of 2024, companies across the globe are increasingly recognizing the need for innovative financial management strategies. The US and global economy is in a state of...
20 Things Every Entrepreneur Needs to Know about Accounting
While entrepreneurs don’t need to become professional accountants, having a solid foundation in accounting principles and practices will enable them to make informed financial decisions, communicate effectively with financial professionals, and ensure the financial health and success of their business.
