Compensation can be more than just a salary. Depending on the company and the products and services of that company, they can determine which compensation strategy best suits the organization. Most companies would like to have the most qualified employees, but to obtain them, the company must be able to offer competitive compensation in the market. Although the position in the market is worth a certain amount, it may not match the worth inside a company. Companies should still follow the competitive market compensation strategy to get employees and reduce turnover. If employees feel as if they are not making enough in the company, they will look to go elsewhere that offers competitive compensation for the position they are currently in.
Although marketplace compensation competitiveness will attract and retain employees, the company will want a return on its investment, so it should also implement an internally consistent compensation strategy. The success of a company can be based on its human capital. The employees’ characteristics, interactions, strategic planning, and implementation can be the advantage the company gains (Kang & Lee, 2021, p. 1). Individuals who know the value of their skills and knowledge will join a company that offers competitive compensation in the marketplace and, in return, will use their skills and knowledge to help the company grow in hopes of continuing to grow with it (Kang & Lee, 2021). Internally consistent compensation is built on job descriptions, and employees can base the worth of the job description on their known value and skillset (Martocchio, 2019).
Companies can have both competitive compensation strategies, but to do so, they must find a balance between both compensations, which is where benefits come in. If compensation is competitive with the marketplace for certain positions, it can open the door for employees who can grow within the company and benefit from internally consistent compensation. Offering a competitive salary in the marketplace for certain positions while offering bonuses or rewards for performance can help compensate the employee while benefiting the company with skilled professionals. If the salary and bonus or reward are collectively competitive with the marketplace, the company should be able to do both successfully.
The challenge for companies doing this is that they may only have limited budgets to work with. To combat the budgeting issues, the performance rewards and bonuses should be in a certain tiered structure where not every position will be worth the same percentage of reward or bonus. Higher positions would receive a higher percentage of reward, which can encourage employees to continue to grow and develop inside the company (Greene, 2019). However, the drawback of this strategy is that some employees tend to find this unfair that the already higher-paid positions make even more money. If the tiered structure is not feasible, the company could instead implement a performance compensation structure, where top performers receive a percentage, and as the performance declines, so does the amount eligible to receive in bonus or reward. The advantage of this strategy is that it encourages productivity and performance and brings to light the low and underperformers (Greene, 2019). The disadvantage is that employees may feel as if the assessments are biased. Seniority can be another strategy used. Offering bonuses and rewards based on seniority may encourage employees to stay, reducing turnover. Still, it could discourage performance because newer employees may feel their hard work is unnoticed and underappreciated.
Out of the many options a company can choose when it comes to mixing compensation strategies, it is important to keep one thing in mind. 1 Corinthians 3:8 says, “He who plants and he who waters are one in purpose, and each will be rewarded according to their own behavior” (Press, 2015). 2 Corinthians 9:6 says, “The point is this: whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully” (Press, 2015). Hard work has always been considered something that should be rewarded, and those who do the bare minimum should receive the bare minimum.
References
Greene, R. J. (2019). Competitive and equitable compensation: Can you have both? Compensation & Benefits Review, 50(4), 196-200. https://doi.org/10.1177/0886368719852200
Kang, E., & Lee, H. (2021). Employee compensation strategy as sustainable competitive advantage for HR education practitioners. Economic and Business Aspects of Sustainability, 13(3), 1-23. https://doi.org/10.3390/su13031049
Martocchio, J. J. (2019). Strategic Compensation. Pearson Education. https://mbsdirect.vitalsource.com/books/9780135175910
Press, I. (2015). The Didache Bible. Rev. James Socias.
