5 Reasons You Should Pay for Performance

5 Reasons You Should Pay Employees for Performance

bamboohr.com payscale.com

Daniel DeanProduct Marketing Manager

BambooHR

Mykkah HernerModern Compensation Evangelist

PayScale

What IsPay for Performance?

“Links pay (base and/or variable), in whole or in part, to individual, group, and/or organizational performance.”

—The World at Work Handbook of Compensation, Benefits & Total Rewards

Types ofPay for Performance

• Bonus

• Variable (commission)

• Yearly raises

5 ReasonsYou Should Pay Employees

for Performance

Cost-Efficiency

Recruiting and RetentionThe average raise is 3 percent of salary.

The cost to replace an employee is 30-400 percent of salary.

It’s the Right Thing To Do

Better Culture and Happier Employees

“In large part, culture is a product of compensation.” — Alec Haverstick

Drives Results

Who Does Compensation Matter Most To?

BABYBOOMERS1946-1964

GEN X AND BUSTERS1965-1983

GEN Y AND MILLENNIALS1984-2002

COMMUNICATION ABOUT COMP

AVERAGE TENURE

CAREER MINDSET

Mostly Private

15+ yrs

RetirementWork/Life Balance

AVERAGE TENURE

CAREER MINDSET

Somewhat Private

5+ yrs

ManagementWork/Life Balance

AVERAGE TENURE

CAREER MINDSET

Public

15 mos-2 yrs

Go-GettersAdvancement

Flexibility

GenderMEN

• No. 6 reason they left their job

• 79 percent are annoyed by low salaries

• 74 percent are annoyed by unequal pay

MANAGERS

Manager Non-Managervs

NON-MANAGERS

• Individualized Rewards & Recognition

• Variable or Incentive Pay Plan

• Base Pay Plan

• Company Culture, Compensation Philosophy & Compensation Strategy

The Compensation Mix

• Develop Clear Compensation Strategy

• Get Reliable Market Data

• Develop Clear and Aligned Goals

Strategy

How Should I Start Paying for Performance?

What’s HinderingPay for Performance?

Negatively labeled Millennials

Talking compensation is taboo

Switching jobs is easier

Moving away from performance reviews

Daniel’s Tipsfor What To Do Today:

Take a look at your culture.

Bring back (some) reviews.

Create clear communication.

Make unique decisions for yourunique company.

Mykkah’s Tipsfor What To Do Today:

Gain executive buy-in.

Align with organization goals & culture.

Get the right systems in place.

Train managers properly.

Communicate clearly across the organization.

“Employees won’t believe there is a link between pay and performance unless they can see it.”

—Margaret O’Hanlon, re:Think Consulting

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bamboohr.com/blog | payscale.com/compensation-today

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