Even Small Businesses Need Compensation Management
During the early days of a startup, making payroll might seem touch-and-go. You might be able to close deals, but the money goes straight back into the business — whether that’s to fund more development or just keep the lights on. Employees in a fresh startup environment know that checks might not come regularly, and amounts might vary. But the sacrifice can be worth it to work on something so new and exciting.
As your company starts to see some stability, though, it’s time to come up with compensation plans for your current and anticipated employees, even if your company is the smallest of the small.
Compensation management for small businesses is just as important as it is for large enterprises. In fact, it can be even more important because things are pretty transparent for small businesses. Here are five things to keep in mind as you develop your small business compensation plan:
- Check the market rates: People are willing to work for less when it’s something they believe in, and in the early days, that flexibility could help you keep the business going. As you stabilize, employees and prospects will be checking how your plans rate against salaries on Payscale.com or Salary.com. Knowing these rates will be critical when you also need to recruit talent as you grow.
- Be clear about the whole package: Salary is just one component of compensation, so if you offer additional benefits such as full healthcare coverage or flexible PTO, communicate how that rounds out an employee’s total compensation package.
- Add non-financial rewards when you can: Especially when money is tight, look into creative ways to reward employees. Small businesses require employees to wear a lot of hats, and the early phases may mean employees work around the clock. Can you give an employee a title boost? How about the ability to work from home?
- Project what rewards will look like in the future: You don’t have to take a standard approach to raises and bonuses, but figure out what you are going to do (so you can budget for it). High performers might deserve a significant boost, but you might also want to give everyone a reward if the business overall is doing well. Identify the options you’ll want managers to have when it is time to reward performance and make sure they’re in line with the values you want to communicate to employees.
- Answer questions when they come up: You’re not going to be able to predict what will happen in three years — things change really quickly — but answer questions about your plans when they do come up. Be honest and clear. Employees will appreciate open communication and trust the decisions your leadership team is making.
Small businesses can make a big difference in the market, so rewarding employees is important to that success. Develop a comprehensive compensation management plan, and then you can focus on other strategic elements of your business.