Northwest Staffing Blog

You want to be able to hire the top performers in your industry. But, at the same time, you don’t want to break the bank. So how can you develop a compensation plan that’s right for both you and your employees? Answer: Offer plans that are based on skills and performance.

Here’s a look at three of the most popular:

Plan #1: Skill-based pay.

In this plan, compensation is based on the skills of the employee, rather than on the employee’s actual job. To utilize this compensation plan, you first have to develop a list of skills that are necessary to succeed in the position. The employee’s compensation is then increased as they master each skill on the list.

Pros & Cons: This plan creates a strong motivation to enhance job skills and can lead to higher productivity. But it can also be difficult to manage if skill sets change frequently.

Plan #2: Competency-based pay.

This plan is similar to skills-based pay, however general attributes are evaluated, rather than specific skills. Again, you will have to develop a list, but for this plan, it should include important characteristics, such as leadership and multi-tasking abilities. Compensation is then based on the extent to which the employee exemplifies these characteristics.

Pros & Cons: The competency-based plan encourages employees to consistently perform well, however it can also be hard to measure since competency can be subjective.

Plan #3: Variable compensation.

With this compensation plan, employees are paid a smaller base salary, but are given the opportunity to earn bonuses based on meeting certain goals. Goals can be individual, departmental, and corporate.

Pros & Cons: This plan rewards top performers and encourages employees to work together to achieve departmental and corporate goals. But, on the flip side,  when the economy is down, it can be difficult or impossible to meet certain goals, resulting in low employee morale.

Determining which compensation plan is best for your company will take some time and effort. But the result will be well worth it. And if you need help developing a compensation plan that’s right for your company, please contact Northwest Staffing. As staffing specialists serving employers throughout the Northwest, we can help you craft a competitive plan – one that will entice top candidates and also work well for your company.