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Salary is the most popular method of employee compensation due to its stable nature.
Benefits are often the key differentiator between employment offers. Benefits focus on stability, health and wellness, and lifestyle.
Like benefits, non-cash compensation focuses on the employee’s lifestyle and values. These may include flexible work arrangements and office space improvements.
Employee compensation is one component of a competitive human resources strategy. To be successful, compensation should:
*If you have 10 or more employees (or when you’ve hired your tenth employee), you must ensure you meet the Ontario Pay Equity Act obligations. For further information, refer to the Ontario Pay Equity Commission’s guide, Step-by-Step to Pay Equity: Mini-Kit.
To define your startup’s employee compensation strategy, you need to understand the following five elements:
When reviewing your your startup’s business plan, consider the following:
Your startup’s management team must reach consensus on its philosophy and strategy with respect to compensation policy. Management should assess:
To evaluate employee compensation preferences, take into account where employees may place a strong emphasis. This may be:
Consider what trade-offs could be made, and whether all aspects of compensation should be the same for all employees.
Determining an organization’s competitive market for skills does not mean reviewing the market in which your product or service competes. Rather, it means examining the market(s) in which your startup competes for talent.
Most organizations typically hire the majority of their employees locally. Sometimes, however, when skills are scarce, it is necessary to broaden the search to national or even global markets.
Reflect on the organizations to which you may have lost employees. To help you analyze the market and the related compensation implications, think about:
By taking a careful look at your workforce and the market, you will be able to assess your current position and develop a plan to become competitive. Even if this process illustrates that your startup already offers competitive compensation, the value of knowing this and communicating this to your employees is unmeasurable.
To assess your current position in compensation:
A realistic and affordable plan may take longer than one year to achieve. However, by carefully monitoring the market and communicating progress to employees, your organization can reach the desired competitive strategy.
Exploring all these components of an employee compensation strategy will help you to create the foundation for your startup’s compensation decisions.