How to Create a Strong Employee Compensation Package


One key reason people work, of course, is to earn money. So how much you pay your employees — and the factors used to establish pay scales and award raises, bonuses and incentives — can profoundly affect the quality of your workforce. Professionals who are underpaid are more likely to seek new employment. Therefore, it's important for small businesses to offer an employee compensation package that meets or exceeds the average for your region or industry.

Base salary: The foundation of compensation

Before creating an employee compensation package, make sure you've reviewed up-to-date, regional-specific salary information for the positions you need to fill. This data helps you structure your wage policies, and it can give you a competitive advantage while you're building your employee compensation package.

It's important to have good benchmarks for your compensation levels, such as government and association reports, as well as salary surveys. These publications can also point out trends affecting wages at small businesses like yours. For instance, take a look at the annual Robert Half Salary Guideswhich provide starting-pay information for thousands of positions in a variety of professions. Our Salary Centers feature additional commentary on hiring trends, and our salary calculator adjusts for regional differences.

Want more advice on effective management? Take a look at our Small and Mid-Sized Business Resource Center.

Rewards for outstanding performance

Some small businesses opt for variable pay programs in which incentives, bonuses, commissions, profit sharing or lump sums are awarded periodically in addition to base salary. The additional employee compensation package is generally tied to individual performance and the company's profitability.

Employee compensation on a budget

If your budgets don't allow for higher salaries, you can still distinguish yourself from other employers through other forms of compensation. For example, provide special perks that not everyone offers. Or focus on elements that increase the appeal of your workplace. 

To ensure your employee compensation package is current and fulfills the needs of your staff, hold two-way discussions with employees periodically. That will help you find out which incentives are most important to them, so you can continue refining your offerings.


Benchmark your salaries with other organizations with our Robert Half Salary Guides. Download yours for free today.