Welcome back to Aligned Incentives, the newsletter from ShareWillow.
Coming up this week:
Crafting an attractive compensation plan for 2024.
Why rewards and incentives are so powerful.
How you can use incentives to drive massive results in your business.
A compensation plan is a set of guidelines by which employers reward employees beyond their salaries. It's a form of employee benefits that includes bonus payments, retirement investments, health insurance, and other financial incentives.
A compensation strategy is very attractive to both the employer and employee because not only do they provide financial rewards but also align employees with company values and goals.
Key takeaways:
The main goal of a competitive compensation plan is employee retention.
The total compensation package can be direct compensation (e.g. base pay only), indirect compensation (e.g. special perks), or a mix between the two.
An effective compensation program includes both potential and existing employees.
It forms a crucial part of your business strategy to attract and retain talent.
The future of compensation plans leans toward more transparency about compensation plan payouts and the utilization of AI management software tools.
Why You Need a Compensation Plan for Your Employees
As mentioned, a compensation plan is a structured strategy that outlines how employees are rewarded for their contributions to your company, beyond their salaries. It involves various financial elements such as bonuses, benefits, commissions, and incentives designed to attract, motivate, and retain top talent.
There are two types of compensation options:
Direct compensation strategy - in the form of employee salary, bonuses, and equity.
Indirect compensation strategy - such as health insurance, education incentives, paid time off, or housing and car allowances.
Implementing a comprehensive compensation plan forms an important part of your business strategy for several reasons.
Go deeper: Check out our full post on this topic here.