Business Owners

In an economic climate that is becoming more and more volatile, business owners should make opportunities to retain key workers and lure valuable new employees. This may be part of the HR department’s job, but in what way should you achieve it? Research shows that the more out-of-the-box an enterprise is with its employee compensation plan, the happier, more productive workers will become, plus the more work satisfaction they will have.

A recent MetLife study serves as an example of the above. The study reveals that the relationship between employee satisfaction and compensation benefits is reciprocal. In 2013, MetLife said that the chance of professionals being satisfied with the benefits is over twofold than that of them being content with work. MetLife had been performing the study over the decade or so, and in these years, workers always suggested that the key factor in them choosing an employer is their benefits.

Anyhow, the unemployment level dropped as the economy gradually improved in 2016. In numerous instances, the above meant that business owners had to make a special effort to lure top talent and retain the talent. As a result, you might be wondering which areas of compensation to target? You might want to try the following, to start with.

Performance-Based Pay Hikes And Bonuses

Offering hikes and bonuses are an excellent way of grabbing a fine worker’s attention and motivating them. Even so, there is a science and art to the above.

Are you planning on giving out hikes and bonuses during a trickier business climate? If yes, consider giving these to just those workers who can show that they have added to your company’s value by gaining new skills or assuming new responsibilities. Reveal the above publicly. Inform workers that you wish to compensate them for becoming top performers.

When setting a hike, bonus scheme, or both, ensure that there are easily understandable objectives in it. For instance, when instituting a campaign throughout the company for a 10% increase in sales, provide a small portion of worker annual salaries as an incentive for achieving this objective. That portion may be as little as 5%, but consider giving it as a bonus to help achieve it.

On a per head basis, bind bonuses and hikes to annual objectives set during recruitment (for recently-recruited workers) or during one’s latest performance review. Some of the potential factors which affect that kind of hike or bonus are strong customer service feedback, fulfilling or surpassing project deadlines regularly, plus whether the worker assumed new duties or gained new skills.

Employee Stock Options

Utilizing employee stock options to incentivize workers is still tempting to organizations, as these need not be charged in the form of a cost to earnings. Therefore, ESOs are among the best ways for organizations to keep money, while offering workers competitive salary packages.

The stock options entitle workers to purchase a fixed number of company stock shares at a predetermined rate for a particular period. Vesting rules may vary by company, but workers are often entitled to apply one-fourth of their ESOs annually over a 4-year period. Almost every employee stock option expires 10 years post its allotment, even though it is not unusual to have vesting periods of 4 and 5 years.

Over the 1990’s period and the early parts of the noughties decade, several employers allotted ESOs like candies, only to suffer its consequences. Due to the move, the inundation of ESOs ended up diluting those companies’ stocks, thereby lowering the company value to both shareholders and workers. Anyhow, during the so-called ‘new normal’ with slower growth, employers should distribute ESOs to select workers with annual maximums.

Use ESOs as a bargaining tool for drawing in new workers or keeping valuable employees from quitting your company. Be selective in distributing these during bonus periods and annual reviews. If you go by Wall Street’s information, using their stock options too many times can adversely affect companies.

Profit-Sharing Scheme And Employee Stock Ownership Plan

Employee Stock Ownership Plan

While the conventional corporate practice, ‘profit-sharing’, slowed over the first 15 years of this century, the compensation model could return to what it was before.

Largely, a conventional profit-sharing scheme is a clear contribution plan in which the employer approves offering their workers considerable and recurring, yet usually discretionary, contributions. During the years without any profit, they need not make any contribution to their staff. That said, they may make it even if they have no annual/accumulated profits. Profit-sharing schemes may usually need a year of business service.

ESOP is among the best-known employee benefit schemes. In being a qualified employee retirement plan, it is similar to profit sharing. The employer makes contributions for their workers, and these are allotted to the latter’s accounts as per compensation. These are not only invested but also tax-free, up to the time of a worker’s retirement or termination. In one of these two situations, the worker concerned would get the interest that legally belongs to them in the scheme.

Executing the plan means being able to make a team of workers/owners that has the objectives identical to shareholders. Each of these workers will be encouraged to not just make a feasible, growing, and lucrative company but also get better work satisfaction.

Which are the best ways to implement the plans? Using these to offer workers ownership stakes in their company is usually among those ways. If the workers perform better, then the employer would fare better, or it would be the other way around. Imagine a plan in which 15% of your enterprise’s profits are divvied up equally among those who have been your full-time workers for at least a year. This would possibly mean the productivity of workers going up, as they become more energetic or effective at what they do to capitalize on your business success.

Other One-Of-A-Kind Options

Not all have much money nowadays. When having an excessively tight budget, consider swapping financial incentives for lifestyle incentives, such as training programs that your company sponsors or extra vacation time. Alternatively, you may include eye- or dental-care insurance coverage in your company’s health packages.

Keeping Staff Members Satisfied And Motivated

Monetary incentives go beyond the limits of paychecks, so these are an amazing way of not just sharing your corporate wealth but also keeping workers loyal and content.

Do you plan on getting your new employee compensation scheme started to work properly? If yes, be sure to communicate the scheme to workers, and change the plan elements that are not working without any hesitation. For instance, in the event of workers being reluctant to accept stock options, think about offering them cash up to the time your stock market becomes brighter. That said, avoid changing things too frequently. Why? Because changing things all too often would be disruptive, plus it would gradually destroy the credibility of the scheme among workers.

A fine, creative worker compensation plan can be the factor that decides whether or not your business’s bottom line will be in the red. You being the owner/part of the company’s top brass should drive its revenues to the positive zone, and distance it from the red zone.