Compensation issues can happen even in the most organized and most people-oriented companies. Even the littlest compensation issue can impact the enthusiasm at work of the employees in the entire organization. When ignored, compensation issues can have you saying hello to disgruntled employees who’ll no longer show interest in staying with your company. 

With that, it’s an absolute must for your human resources department to ensure, for starters, that the compensation you offer your employees is enough to make them stay by ensuring that relevant wage theft laws, among other laws, are also respected. Once that’s achieved, you must go up a notch higher by addressing compensation issues as soon as they arise. 

There are many compensation issues that the human resources department of a company can face. This article gives you a gist of what those compensation issues are, as well as the remedies HR can do to avoid them. 

compensation issues

1. Retirement Plans And Relief Provisions

When times are financially dire, it’s a common sight in the HR department to have employees running towards the retirement plans given by their employer. These retirement plan savings become their initial source of emergency benefit savings. 

Ideally, the retirement plan savings should only be touched when the employees are no longer working because of their retirement. When such retirement savings have to be used during employment, the two main ways to do so are through plan loans and hardship distributions. 

Here’s a brief discussion as to both: 

  • The hardship plans which are taken by employees before 59.5 years old are subjected to a penalty amounting to 10%; 
  • On the other hand, plan loans should be repaid on a fixed schedule, as if they aren’t paid again. They’re also subject to the same 10% penalty. 

2. Internal Equity 

Internal equity means that employees with comparable skills and positions are compensated similarly in an organization. The compensation referred to here encompasses the base salary and other benefits and perks included in the job. Depending on where your business is based, internal equity is required. Otherwise, you may risk losing employees and face lawsuits as well. 

In many countries, equal work for equal pay is being practiced. Check with your local labor laws, so you can be sure you aren’t committing any violation. 

3. Pay Transparency

Pay transparency means that employees need and want to know how their wages are computed, and the basis for any changes. While employers aren’t required to disclose their employees’ wages, the standard should be clear that each employee knows with certainty how their base rate is computed.    

If an employee questions how their salary is computed, the employer should provide a pay slip with a breakdown of their wage, benefits, overtime pay, and any deductions. This way, the employer, though the HR, can practice pay transparency to their employees and avoid misunderstanding and underpayment. 

4. Competing For Talent

For businesses to be competitive, they must employ a competitive team of employees. It means that right from the hiring process, businesses face the need to hire competitive talent. One of the ways to get this done is by using a competitive pay and benefits scheme to attract talent. 

Professionals looking for jobs today want to feel like they’re going to receive a salary commensurable with their skills, expertise, and even the amount of work they put in. Without showing potential new hires that you can give them a less-than-average pay, chances are they won’t even consider applying for a position in your company. So, the company, through the HR department, must offer competitive salary rates to lure in qualified employees to work with the company. 

5. Geographical Differentials

This fifth compensation-related issue is prevalent now with virtual or remote working setups. Technology has made it easy for many companies to hire employees across various locations, most of which are international. There’s no hindrance to working remotely for as long as the Internet is present. 

Not many employers, however, realize the geographical differentials that need your attention. In remote working arrangements, employees with the same job function or role may need different salaries, considering the differences in the cost of living. 

Now the question arises. If you consider those geographical differences, how will you compute their salaries? How will you explain and discuss to your team what those differences are for them to understand?  

If you decide not to account for geographical differentials, how can you make up the difference for employees who live in countries or states with a higher cost of living than those in lower ones? This question is best decided upon by the upper management of a company, as it can differ from one company to another. 

Conclusion

Some of the most pressing issues faced by HR managers and entrepreneurs alike are compensation-related, among the many other problems in business. Finding the right balance between paying the wages and earning a profit isn’t always the easiest. On top of that, there’s the trouble of other compensation issues like those discussed above. However, note that a business can only perform as well as its employees are happy and satisfied. At the onset of those compensation issues, tackle them ASAP to prevent them from catapulting into unmanageable situations for your business.