Upton Sinclair – An American writer & political activist once said “It is difficult to get a man to understand something when his salary depends upon his not understanding it “

Organizations must address a variety of compensation issues as they design compensation programs to attract & retain talented employees. Ignoring compensation issues at your organization can lead to unhappy workers, a reduced morale, decreased productivity & in this case a high increase in turnover. Compensation issues can happen even in the most organized companies & most people-oriented companies. Even a smallest compensation issue can impact the overall motivation at work of the employees in the entire organization. When this is ignored, compensation issues can have you facing disgruntled employees who’ll no longer show interest in staying with your company.

With today’s competitive talent market in India & the compounding effect of economic factors like the lack & ever-increasing demand for skilled talent, high inflation, Senior Management of organisations face tremendous pressure to create a competitive compensation strategy.

Most employees want more from work than just a paycheck. They want mentorship, productive work environment, community, a sense of purpose, career growth, and overall professional development. They also want fairness & equality, both in the way they’re treated & how they’re compensated.

This article gives you a gist of what the top 5 compensation issues are, as well as how as a HR can do to avoid them:

  1. Pay Equity

Internal Pay Equity

Having internal pay equity is essential for your organization. You would be at a great risk of losing employees & facing lawsuits due to not having Internal pay Equity. Internal pay equity means that you would compensate your employees with comparable positions or based on skills within your organization similarly. This includes salary & additional benefits and perks that come with the current job. In most countries, equal pay for equal work is a legal must requirement.

External Pay Equity

External pay equity is what outside companies are willing to pay for the same talent. Therefore, you must consider the broader open market & available talent in the industry while building your compensation structures. If you pay under market salaries, you will not attract new employees, and you will lose the existing ones too.

Equity based on Perception

The perception towards the levels of internal & external equity is crucial. The employees might be paid equitably and would be in line with the market standards, but the employees might feel that they are being underpaid. This can cause disgruntled & less engaged Employees in the organisation. Here, each team member decides whether their salary & benefits are fair would vary from person to person. However, usually, these conclusions tend to be made based on a comparison with peers working in the same job or industry. The HR department must manage your employees’ expectations around compensation so that your workforce feels a greater sense of belonging, connection & loyalty to the organization.

  1. Compensation to Executives & Senior Management

    Executives & Senior management employees play a crucial & vital role in your organization because they are the ones who would create your organisations strategy, Company Vision, Mission & Goals & they make the crucial decisions to have a strong & effective organisation running like a well-oiled machine. To keep them satisfied in your company, it’s essential to build the right overall compensation package. Without the Executives & Senior management the organisation would lack direction and will face management & HR issues.

    1. Geographical differences

      With Global Distributed teams & remote working as a new norm, compensation-related issue is bound to prevail unless you have a dedicated Compensation & benefits specialist in your HR team. Technology has made it easy for many companies to hire employees across the globe. In such cases, the CTC, incentives & benefits would vary from employee to employee, state to state and country to country.it would also differ on account to the cost of living in different locations.

      It is very important to communicate the differences to your employees & prospective candidates.

      1. Career Growth & Salary Hike

      Employees need to have a career pathway planned right from the onboarding & induction stage. We live in a candidate-driven market where potential employees get the power of salary negotiations. With the rise in Demand and shortage of skilled staff the market leads to significant pay increases for those looking for new jobs but can also cause a problem for current employees who see less career growth.

        The HR team would need to have KRA’s, Goal Setting, Performance Reviews & Discussion with the employee’s manager and will need to decide how often & when your employees get salary hikes & progressions. In addition to making sure salaries are fair with new employee’s salaries, you will need to assess & evaluate the market standards time to time.

        1. Legal Compliance Issues

        Issues with legal Compliance is always on the mind of HR & Compensation and benefits team. In addition to being competitive with the external market, the pay must be equitable internally within the organization. Businesses must be careful not to violate any form of discrimination laws, should not improperly set up benefits packages such as retirement or health insurance contributions or avoid overtime pay requirements.

          The Indian labour laws ruled by specific acts which are made for employer & employees to strictly follow for compliance. In the recent few years, the Indian parliament passed four labour codes in the 2019 and 2020 sessions.

          These four codes will consolidate 44 existing complicated labour laws which are namely:

          • The Industrial Relations Code 2020
          • The Code on Social Security 2020
          • The Occupational Safety, Health & Working Conditions Code 2020
          • The Code on Wages 2019.

          Some of the most stressful issues faced by HR managers & Entrepreneurs are mostly compensation related. Disregarding compensation problems in your organization can significantly impact your worker, Team productivity and overall business profits. Not only can you get in trouble legally for not providing equal pay for equal work, but you may have a massive attrition issue if there are other more exciting offers elsewhere in the talent market. Therefore, to keep your team happy, you must take necessary steps to identify compensation issues in your organization and fix them.

          You can always outsource your HR, Payroll & Compliance to a HR specialist such as Multi Recruit. Being an Expert in HR consulting & outsourcing with more than 9+ years of experience, Multi Recruit has specialised in creating, managing & implementing HR processes & Policies. We have the knowledge, technology, and best practices to support you in all aspects of human resources and employment administration.

          Our HR solutions are designed to be completely transparent & complaint and we provide companies with a Dedicated Resources to managing and support all HR and employment processes, thus allowing you to focus on the key business areas.