Best Plans to Reward High-Performing Employees
How to REWARD HIGH-PERFORMING EMPLOYEES
Instead of a more traditional annual review focusing on equitable pay among staff members, employers should consider compensating their employees, especially high-performing employees, based on merit and job performance over a predetermined period.
Advantages
- Increased motivation-employees will be incentivized and, as a result, become more enthusiastic about doing a job well done
- Higher work standards will be set to meet performance
- Differentiation between staff who is is over/underperform-higher performing employees will be recognized for their job well done
- More clearly defined company goals and objectives- employees will understand and deliver on work expectations which will lead to increased productivity and retention
- Recruitment- there will be further opportunities for pay and advancement, which will intrigue job applicants
Disadvantages
As your organization looks to implement a merit-based compensation plan, consider the downfalls, including increased employee competition and employee bias:
- Without clear standards on merit pay may be awarded, merit-based pay is subject to interpretation and bias from each individual’s supervisor
- Employees may begin to expect raises and forget about the performance aspect of pay
- Instead of unifying the interest of the company, merit pay can bring competition within the workplace
- Lack of communication and understanding- it is important for the supervisor to clearly define and explain to employees how the merit pay system works
Set up Merit-Based Pay
As listed above, setting up a merit-based pay structure has advantages, including increased employee motivation and retention. Before implementing a merit-based pay structure, there are important steps to take, as indicated below:
Consider budget implications
Before implementing the merit-based pay policy, to better understand and account for the future, establish a budget for pay that may be rewarded for employee performance.
Develop Policy
It is important to have a consistent, documented merit-based policy that clearly defines how employees will be awarded additional pay for their performance based on existing metrics and timetables. This will help eliminate bias and inconsistent merit-based pay within the workplace.
Communicate
Once your organization has decided to implement the merit-based plan, set standards, and account for budget implications, develop a communication strategy to communicate with your staff what is expected of them clearly and the company standards.
Clearly Communicate:
- Company Objectives and timeline
- Merit Standards
- How merit pay will be calculated
- Departmental and individual goals
Software Consideration
To eliminate the risk of error and to streamline operations, it is recommended that your organization utilizes software to track salary data and the merit pay structure. The software can also help your organization evaluate metrics and the success of the merit-based pay system.
Summary
Merit pay can go a long way by showing your organization that you honor their hard work and dedication. Employees will begin to feel appreciated, work harder, and display higher retention levels.