What’s HR’s role in compensation, rewards, and benefits?  | Moorepay
June 24, 2024

What’s HR’s role in compensation, rewards, and benefits? 

As an HR pro, you’ll know the value of having a five-star compensation, rewards, and benefits package for your employees.

Not only will it boost employee experience by giving your workforce access to desirable perks to help them make considerable financial savings and support their health and wellbeing, but it will also attract and retain top talent. Enabling you to compete with the remuneration packages offered by larger businesses, providing a comprehensive benefits package will give your recruitment process a competitive edge and retain your most valued employees – a must-have employer offering.

Compensation and benefits include both monetary and non-monetary rewards given to an employee by their employer. Combined, they make up a total compensation package, which can include salary, bonuses, insurance, pension contributions, and an assortment of other perks designed to attract, motivate, and retain employees.

According to a survey carried out by the CIPD, only 57% of employees say their employer has told them what benefits are on offer to them and 53% of employees say their employer has told them how to get those benefits. This shows that there’s still work for employers to do when it comes to promoting their benefits packages and educating their workforce on how to make the most of them. So, what’s your role when it comes to compensation, rewards, and benefits?

Formulating compensation philosophy

A compensation philosophy is a document created by HR and business leaders, to provide guidance on remuneration choices. The document should include advice on compensation structures and packages, benefits programmes, and how to motivate and retain top talent in your organisation. The philosophy helps to align compensation with the strategic goals of the organisation, taking factors into account such as most valuable roles, financial position, size, market standing, industry, and values.

A fair and transparent pay philosophy will motivate current employees to exceed their duties and stay with the company. Additionally, it guarantees that everyone is paid equally for the same work and that the organisation stays compliant with evolving compensation laws and regulations. Furthermore, it demonstrates to employees your commitment to equity, inclusion, and generously rewarding outstanding performance.

When creating your compensation philosophy, consider the following steps:

1. Assess and align the goals and culture of your organisation with your philosophy. 
2. Analyse market and industry standards to ensure your compensation is competitive.
3. Create your pay bands for each role within the organisation. 
4. Create your rewards package (including employee benefits, flexible work schedules, etc.) 
5. Communicate the philosophy to employees to provide full understanding and acceptance. 
6. Review the philosophy annually or every time there’s an impactful change within the organisation to keep it accurate and relevant.

Determining compensation strategy

You’ll also play a crucial role in shaping the company’s practical approach to employee compensation and benefits. This includes establishing policies for base salaries and benefits, determining the company’s market position, and other related aspects.

Your compensation strategy is crucial in shaping your organisation’s culture and promoting its values. Therefore, it must align with your core values; otherwise, employees may become confused and dissatisfied. HR should collaborate with the leadership team to discuss the behaviours that embody your ideal culture, and then develop a compensation strategy that aligns with these behaviours.

Creating a strategic compensation strategy requires the following steps:

1. Assess your current compensation strategy.
2. Gather feedback from your employees.
3. Analyse your competition and conduct market studies.
4. Discuss the budget with managers and stakeholders.
5. Establish pay grades.
6. Ensure legal compliance.
7. Create a plan for rewards and bonuses beyond the salary.
8. Communicate your strategy with your employees.

Creating an employee benefits strategy

To attract, retain, and nurture employees, it’s essential to create an environment and structure where people feel appreciated and valued. A successful employee benefits strategy is a crucial part of this effort and a key responsibility of HR professionals. Providing the right employee benefits to the right individuals enables you to attract exceptional talent and gain a competitive advantage. It also helps retain your top employees, reducing recruitment costs and enhancing productivity and team morale.

Aligning the employee benefits strategy with the long-term business strategy is key. Consider what you aim to achieve with your benefits programme and how you will measure its success. You’ll be able to create an appealing benefits package by understanding the needs and preferences of your ideal employee and utilising data to monitor which benefits are popular and which are not, helping you to adjust your offerings accordingly. There are numerous factors to consider when developing a successful employee benefits strategy.

For example, you should give thought to the fact that a variety of personalised benefits are needed to meet individual needs, therefore diversity, equity and inclusion must be considered. Technology is also crucial to delivering employee benefits on a global and local scale, and analytics are key for reshaping rewards and benefits. When creating your employee benefits strategy, be sure to make decisions led by data to power you as a workplace that wins.

Addressing compensation issues

Neglecting compensation issues within your organisation can swiftly result in discontent, low motivation, and disengagement among employees, ultimately impacting productivity, morale, and increasing turnover. That’s why it’s crucial for HR to be dedicated to identifying and resolving any compensation issues within the company.

Typical compensation challenges that businesses must address include internal fairness, external market competitiveness, perceived equity, executive pay, geographic variances, rewarding specialised roles, and managing salary progression. To address these issues, you can start by finding out where your organisation sits in the current market by using resources such as Payscale and Glassdoor. You should also conduct an annual pay equity analysis to pinpoint any inconsistencies.

Finally, you can track metrics to measure the effectiveness of your compensation practices and policies and make improvements where necessary.

Involvement in compensation planning

Another area HR is responsible for is compensation planning, which involves strategically balancing the financial interests and goals of the company with the objectives of attracting, retaining, developing, and rewarding employees. A compensation plan includes payment methods, bonus structures, criteria for raises, and more. Reviewing internal compensation data reveals your current position, allowing you to align your planning with the business goals. 

Developing a salary structure that includes salary ranges is essential for strategic compensation planning. It allows for more efficient management of compensation costs and ensures fair pay for employees. Incorporating salary grades within these ranges helps differentiate between varying levels of experience within the same role. Using a dedicated compensation management system will help you to monitor bonuses and benefits use and provide real-time data.

To summarise

To summarise, HR professionals have a critical role in shaping effective compensation, rewards, and benefits strategies to enhance employee satisfaction, attract top talent, and maintain competitiveness. By aligning compensation philosophies with organisational values and strategic goals, HR can ensure fairness, compliance, and motivation among employees.

Developing comprehensive compensation plans and employee benefits strategies not only supports retention and productivity but also requires continuous evaluation and adjustment based on market trends and employee feedback. Addressing compensation issues promptly and utilising dedicated management tools are essential for developing these strategies and achieving long-term organisational success.

Searching for an employee benefits solution? Look no further. Find out more about how you can attract and retain your top talent with our comprehensive benefits package.

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About the author

Molly Ackland

Holder of a Digital Marketing Diploma with several years of experience in marketing, Molly is our Content & Communications Manager. Molly is responsible for all customer communications for Moorepay, and for leading on and producing key content on legislative and industry topics for the Moorepay knowledge centre.