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

1



Recruiting and RetentionThe average raise is 3 percent of salary.

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

2



It’s the Right Thing To Do

3



Better Culture and Happier Employees

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

4



Drives Results

5



Who Does Compensation Matter Most To?



Age

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

WOMEN






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

1.

2.

3.

4.



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.

1.

2.

3.

4.



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.

1.

2.

3.

4.

5.



“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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