There are three main structural elements of compensation system: Internal Consistency, Market Competitiveness, and Recognizing Employee Contributions. Question is, are they equally important or is one more important than the other?

I believe the three main structural elements are equally as important. It’s critical in order for an organization to retain the trust of their employees, to be consistent in their approach in everything they do, especially when it comes to compensation. Not everything needs to be the exact same, there can still be differences in benefits offered to employees, if the differences are consistent among the employees receiving the benefits. For example if  a company offered to provide a certain amount of paid-time-off to their salaried employees, and a different amount was offered to hourly employees, as long as the amount offered to both employee pay types was consistent.

With today’s market, competitiveness is important because in some parts of the country, gas stations are offering their attendants up to $19.00/hr, while manufacturing locations are still trying to hire employees in at $14.00/hr. Without a robust compensation system base pay alone, will be a determent to an organization, if not in line with market values. In some companies keeping up with the market has become an even larger problem because of inflation.  Which ties directly into the last and equally as important structural element – recognizing employee contributions.

The world has been living in a pandemic for the last two years, with recently rising gas prices, and increased inflation, recognizing the hard work that employees are currently providing is critical for employee retention. The simplest way to recognize an employee is to first ensure they are receiving fair (market based) and consistent compensation. Employees do not stay with an employer simply for ‘Pizza Party Fridays’. Unless funds are not a concern and an employee is fulfilled simply by doing meaningful work, most come to work to earn a living to provide for themselves and their families. Placing equal importance on the three main structural elements of compensation systems – internal consistency, market competitiveness, and recognizing employee contributions, is ideal for a successful compensation system.