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The Step-By-Step Guide to Designing a Sales Incentive Plan

The close, the upsell, and the renewal are three things almost every salesperson in the world pursues and are what the organization considers in the appraisal. And three things drive these actions–recognition, skill development, and compensation.

When it comes to assessing the tangible impact of compensation like revenue, market share,launching a new product or service, sales incentives come on top of the list of the many compensation programs organisations administer. 

The motivational theory behind incentives that “the gain you can see in front of you, would be the motivation itself for the sales force to go after it” is pretty much infallible. The opposite effect is also true. When an incentive plan is not designed and explained well, there’s no motivation for salespeople to go above and beyond hitting their targets. A well-designed sales incentive plan aims to create a real, measurable impact on the organization’s bottom-line and induce favorable behaviors.

Here are some tips to help you design a sales incentive plan from scratch:

Identify objectives

The first thing you need to consider when designing a sales incentive plan is identifying your objectives i.e. the reason you are coming up with an incentive plan. It could be to increase revenue, increase profits, promote a particular product, increase customer retention rate, etc. 

Correctly identifying primary and secondary objectives (grow revenue and reduce expenses, for example) will help you decide how you need to compensate your salespeople to help you achieve those objectives

Align objectives with business goals

No matter what the objective is, it must be linked to strategic business needs – New player in the market, achieving growth targets, stretch revenue targets, new product launches, etc. and must be customised to address the desired outcomes.

The overall revenue or profit must be the deciding factor to be eligible for any sales incentive. It not only creates a collaborative environment across the organization but also ensures that financial planning is viable for the business. Further, it encourages cross-selling behaviours, especially where employees are attached to a specific product/service or a line or products/services. 

Know what your employees want

The more motivated your salespeople are the higher your profits go. It’s as simple as that. But, what each employee wants can differ greatly. While it’s not possible to design plans that are unique to each employee, you can limit the gap by:

  • Clearly defining roles like SDR, CSM, AE etc.
  • Create metrics, targets, and quotas based on the different roles
  • Clearly communicating the total value of the compensation

While money is definitely a top motivator, a lot of Gen Y and Z employees prefer other perks like career advancement, skill acquisition, and paid time off. Conduct an internal survey and ask them what motivates them the most. When you understand what drives your employees, you can incentivize desirable behaviors.

Determine the on-target earnings

Before you decide on the incentive and base pay, decide on what a salesperson would be paid annually. This is called on-target earnings (OTE). It gives salespeople a realistic view of what their total compensation might be when their quotas have been reached, including the base salary and the realistic commission. 

Identify the right incentive form

The goal of variable pay is to reward employees based on their performance, especially when salespeople are financially responsible for results. Depending on the goal, you can decide on an incentive framework. This article delves deep into the various sales compensation plans and methods. Take a look and see which one fits your goal.

You also need to consider if your salespeople are interdependent, in which case the compensation should be a team-based pay, or independent, in which case, the incentive plan should be based on an individual’s performance. If there’s a hybrid mode, where there’s a balance of both individual and team work, you can design a weighted incentive plan depending on your unique situation.

Set achievable (but challenging targets)

The world is changing by the day and so are organisational targets. Sales incentive plans that are not agile enough to align with the dynamic marked-to-market approach fail miserably. Many companies make the mistake of embedding targets which are fixed for a year and even if the assumed business targets go completely haywire due to unforeseen reasons, SIP continues to penalise sales employees before it comes for review again.

Choose the right metrics

Sales incentive payout must be linked with business-focussed KPIs and not the ones that drive the behaviour and culture. Many companies struggle when they end up paying higher incentives due to over-achievement of qualitative KPIs such as discipline, reflection of competencies, compliances, etc., while employees don’t end up achieving 100 percent of their core targets. Reflecting competencies, values and following compliance are non-negotiable aspects of any job and should not be rewarded separately. Perhaps these must be used for considering sales people for development opportunities in the company.

Speaking of quotas, the right sales metrics can optimize the effectiveness of the incentive plan. What matters to you the most–number of units sold, number of new accounts, or the bottom-line in your balance sheet. Use three or four metrics that the reps have control over. Nothing is more demoralizing than being appraised on a metric that you can’t even control.

Be flexible

While the philosophy and umbrella plan can be standardised there must be elements of flexibility in implementation for each market (region, country, cluster and even cities) to embed the local needs and nuances such as customer behaviours, culture and high/low seasons.

Sales quotas need to be fair and achievable. You need to be aware of potential pitfalls of a particular territory and a sales rep handling a challenging territory can not be benchmarked against a territory with higher sales potential. It’s best to consult with sales managers to understand these factors before you arrive at a number.

Set the right payout timings

Incentive plans must deliver immediate and substantial gains to the sales force to keep the excitement and motivation levels high at all times. The most common failure of these plans is to operationalize it with discipline and within prescribed time. Monthly payouts reduce the hockey stick effect when a disproportionate number of deals close during the end of the quarter. The industry standard to pay commissions and incentives is one pay period after the quarter’s close.

You can also design a plan to pay part of it on shorter frequency but still keep the overachieved incentive payable towards the end of the year.  This can serve a greater purpose both in terms of employee retention for longer periods as well as removing the chance of incentivizing employees for bad sales. Such a hybrid model becomes particularly important when the customer onboarding cycles are longer than the incentive period itself.

Automation is the straightforward answer for this challenge. A good compensation software not only manages the process effectively, but also has an embedded incentive simulator for employees to calculate their potential incentives themselves can be highly effective and encouraging.

Review your plan

Audits and reviews are one of the most important parts of an SIP. To avoid failures, have necessary compliances from both ethics or regulatory perspectives. It is imperative to have a strong non-biased audit and review team that continuously monitors the actual performance of sales incentive, market dynamics and business needs.

Typically, incentive plans must be self funded from the additional revenue or net profit. Ideally can range from 1-2 percent of the above budget revenue gain or 4-5 percent of the above budget net profit gain depending upon the profit margins of brands in scope. The danger of not looking at this perspective at the design stage itself is to end up paying from the fixed sales budgets, which no business leader wants to sponsor.

Create the contract

The last step in designing a sales incentive plan is coming up with the contract. It needs to be simple to understand and communicate the plan clearly without confusion.

Closing thoughts

An effective sales incentive plan is easy to implement and administer, keeps the sales people happy and motivated, and doesn’t affect the company’s bottom-line. It benefits everyone. You need to keep it simple and ensure there’s a direct correlation between incentives and improved sales. It needs to be fair and should be administered in short durations.

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The One-stop Guide to Sales Compensation Plans

Choosing the right compensation plans for sales teams is critical for any organization to attract and retain top talent. A fairly designed plan will keep sales people motivated, appreciated, and feel valued while a poor one can cause even the best employees to leave.

However, creating an effective sales compensation plan is not an easy task. In fact, it is tricky even because of the dozen variables you need to balance to ensure fair pay. When developing a pay structure, you need to ensure that both the employees and the management are happy. Getting this right will keep your star sellers motivated and hit targets continuously while increasing profit margins. 

What is sales compensation?

Sales compensation is a combination of base salary, bonuses, commissions, incentives to attract, retain, and motivate salespeople. Its primary objective is to drive performance and incentivize specific positive actions that are beneficial to the company. It also sets the standards and expectations for compensations and drives a result-oriented team.

With the right sales compensation plans, organizations can reward desired behaviors that drive better and consistent revenues on a recurring basis. You can improve your sales compensation planning greatly by using compensation planning software like Compport that are built to give you the relevant insights without relying on guesswork.

Types of common sales compensation plans

Here are some examples of the most common types of sales compensation plans:

Straight salary

In the base salary only compensation plan, salespeople get paid a predetermined amount, irrespective of how much they sell. It is not a common approach to sales compensation because there’s no motivation for sales reps to go the extra mile after they have hit their sales quotas. So the base salary needs to be extremely competitive to attract and retain talent. However, small sales teams that are versatile and focus on multiple functionalities still have a salary only plan.

Commission only

This is when you pay sales reps exactly for the revenue they bring in and nothing more. It’s a rather uncommon approach even though it’s easy to administer. However, it is difficult for organizations to predict their expenses and have to stick to a tighter budget. 

Also, for salespeople, it leads to low income security and stability during certain months or volatile periods. It tends to attract fewer candidates, increase burnout, and can lead to high attrition.

Salary plus commission

This is one of the most common forms of sales compensation where sales reps get a base salary along with an agreed-upon commission based on the value of each sale. There are multiple versions like a flat percentage or a slab structure. Usually, the base salary is low and the commission makes up for the lion’s share of the employee’s salary. 

It’s favorable to both employees and employers because it motivates sales reps to sell more and go beyond sales goals and can increase their earning potential while offering some sort of stable income. Employers have less variability and can predict their expenses with reasonable accuracy.

To arrive at the base salary, you need to consider the difficulty of the sale, lead generation autonomy, and the experience required. As for the variable compensation, think about the complexity of the sales cycle and the influence the salespeople have over the customers’ purchasing decisions.

Salary plus bonus

The base salary serves the stable, foundational part of the rep’s compensation. As opposed to the commissions on each sake, employees are paid a lump sum once the pre-set targets are reached. It gives a much clearer level of predictability while motivating your employees to hit targets and close more deals. 

One disadvantage of this model is that there is no incentive for sales reps to over-perform once they hit their goals and their bonuses are secure.

Territory volume-based commission

Team selling is common these days and this approach is catered to such organizations. Sales teams work on leads and prospects from clearly defined regions or territories. Commissions are paid on the total sales from each territory split equally among all reps as opposed to an individual-sale basis. This mode of compensation works when your team has great camaraderie and can support each other to achieve team targets. Also, the territories need to be clearly delineated so as to avoid clashes and should be rich enough to support competitive commissions. 

Profit-margin based commissions

These plans are common among companies where salespeople have more autonomy over offering discounts to close deals. Reps are compensated on the profit the company makes on that deal instead of the value of the deal or the revenue generated. This discourages salespeople from giving fat discounts to close a deal. However, it becomes difficult for employees to maintain a stable income during lean periods. 

It works great when you combine it with flex times, stock options, and other incentives that attract salespeople. 

How to design a sales compensation plan

Since the performance of your sales team is heavily dependent on their compensation, you need to design a plan that can keep them motivated to go over and beyond without them getting burnt out. You should also communicate the total value of their compensation clearly along with caps, if any, and the total earning potential. 

There’s no one-size-fits-all sales compensation plan and it needs to be customized based on the organization’s budget, resources, and goals. You can either offer a higher base salary or plans where commissions and incentives for hitting targets take precedence. Every compensation plan should be based on the following factors:

  • Job role
  • Sales cycle length
  • Departmental budget
  • External competitiveness
  • Deal types
  • Organizational goals

If you’re building a sales compensation plan from scratch, make sure you go through the following steps:

  • Identify your objectives. Ex: Increase revenue, increase retention, increase cross/upsell rate, increase contract length
  • Align compensation strategy with sales and business objectives
  • Establish role levels
  • Choose a structure based on the above examples. Determine base pay, commission rates, etc.
  • Set quotas, targets, earning caps, and expectations for compensation
  • Assess pay competitiveness based on location, industry, etc.
  • Get inputs from executives, senior salespeople, and other stakeholders

In addition to all these, you also need to pick the right compensation management tool so you can administer the plan. One of the biggest challenges HRs face is compensation errors. A small manual error, something as small as 1%, can add up quickly and can cost your company a lot of money. There’s always the risk of adding an extra zero or a decimal in the wrong place. But the true cost of inaccuracy is even more; your employees lose trust when their bank balances don’t match with their expectations.

You need to automate as much as you can when it comes to compensation. Pick a tool like Compport to eliminate errors and you can rest assured that each commission is calculated accurately. Further, you also get insights to modify and improve your plan. Get a free demo today.

Closing thoughts

Keeping the sales team happy and motivated is critical to the success of any organization. You want to create a plan that will help team members succeed. The compensation plan should be easy to administer, simple enough for salespeople to understand, and reward them for their performance fairly.  

A skilled team when properly incentivized will achieve great results, increased revenue, and business objectives.

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Calculating the ROI on Compensation Software

No matter the size of your company, whether it is a 1000-person strong workforce or a company that is just starting out, compensation management is crucial for success. To ensure your employees’ needs and expectations are met, they must be rewarded fairly for their contributions to the business objectives. Compensation is an essential element in attracting and retaining top talent, and in achieving the strategic goals of a company. 

The need for tech in compensation management

When companies are small, say less than 50 employees, organizations tend to handle compensation manually using spreadsheets with reasonable accuracy and ease. According to Ventana, 35-40 percent of organizations use spreadsheets to manage their compensation. And with good reason. Spreadsheets are versatile tools and are effective for tracking, calculating, and charting the numbers. But, they lack the critical functionalities you need to effectively administer compensation.

As the workforce increase in size, compensation management becomes a strategic element for you to achieve your business objectives, and manually managing compensation may lead to disastrous results:

  • Expensive data entry errors 
  • Compliance issues
  • A lack of transparency
  • Workflows become inefficient
  • Difficulty in scaling operations
  • Not sufficiently empowering managers in compensation decisions

The risks of using spreadsheets for managing compensation planning are enough to inspire a search for something more efficient. Savvy HR leaders know that there are a lot of moving parts like commissions, bonuses, long-term incentives and organizations must go from a manual, tedious, and error-prone approach to more sophisticated ways and reap the many benefits compensation management tools offer.

A comprehensive compensation management system like Compport is built specifically to manage the entire process–from planning to budgeting to execution and communication–can save you significant time while increasing the accuracy and efficiency.  It helps HR leaders and compensation professionals manage ‘total rewards’ as a strategic enabler in their organizations. Further, Compport can:

  • Handle any compensation related complexity with ease and serve diverse needs in your organization
  • Link market data to compensation and rewards decisions to ensure pay equity across your organization.
  • Run multiple simulations, compare the budget impact, and chose the best-fit one
  • Ensure strong compensation governance
  • Access to real-time, multi-dimensional, and intuitive compensation, reward and benefit analytics, and reports
  • Empower managers to make informed rewards decisions
  • Make your compensation communication more efficient and effective and increase the perception of fairness

But, given HR is a non-revenue producing department, how do you justify the use of compensation software?

Calculating the ROI of compensation software

Return on investment (ROI) is a critical metric in the selection of any tool and compensation management is no different. We conducted a study with our existing customers to examine the value organizations realize by deploying Compport and to better understand the benefits and risks associated with using compensation management software in general. We aggregated the evidence and feedback from organizations of varying sizes, to create a financial model that justifies the benefits derived from such an investment.

We estimated an average of 

  • 40 times return on investment,
  • 90 percent resource efficiency, and 
  • 10 percent impact on turnover. 

Please note the numbers mentioned here were derived, as unbiasedly as possible, from Compport’s customers and might not accurately reflect the ROI your organization will realize. Use your own framework to estimate the ROI of an investment in either Compport or other compensation management software. 

You can calculate the estimated ROI for your organization by taking into account the costs and the benefits reaped. Add all your costs toward the software like set up fees, implementation charges, support, and maintenance fees. If there’s a steep learning curve, add labor hours to the cost as well. It’s important to calculate the entire value of the investment to truly reflect the ROI.

For calculating the return, consider the following factors:

Reduced turnover costs

When employees have more clarity and control around their compensation, using self-service portals it can increase job satisfaction and thus has an impact on the attrition. At least 40 percent of employees quit because they feel they are not paid fairly. With a tool like Compport, you can gain insights into pay gaps and inequities and take measures to fix them before they cause irreparable damage. And, reduced turnover means reduced hiring needs.

Employees who are satisfied in their current roles are likely to stick around and thus your retention rate will be high and you can save on hiring new employees as well as the cost of training them. A good way to go about this is to compare data from other companies in your industry.

Estimate the costs associated with interviews, onboarding, and training new hires.

Speed and agility in rewards processes

Manual work costs real dollars. Track the actual hours your team spends on reviewing compensation, calculating pay, delivering up to date job descriptions, updating employee information, onboarding, and convert that into its monetary equivalent.  You also need to consider peak months when audits are frequent and the benefits of using software tools are at their peak.

It can be daunting to keep track of the hours worked and can raise some eyebrows but explain the reasons behind this clearly so the people doing these manual work understand how much time they could save by automating the drudgery.

Compensation teams becoming less administrative and more strategic 

Try to figure out the efficiency in the workforce when you automate all the administrative tasks in managing compensation. Depending on the complexity of the compensation processes, automation may lead to optimization in the headcount in the HR Team and/or it can help you better utilize the intellectual resources that you have since you will be shifting from being administrative to strategic.    

Accountability and ownership 

If the compensation processes are not sufficiently automated, organizations tend to cascade compensation decisions to a certain level only, not whole levels of managers in the organization. This limits the empowerment of managers and the accountability & ownership around the rewards decisions. If an organization can not create ownership at all managers, there is only little chance to create full-understanding and trust among the employees with regards to their compensations. Automation can help you to give better experience to your managers and employees in any compensation processes, which would yield engagement/ productivity and performance benefits.

Whether it is sales incentive simulation or clarity on bonus calculation for non-sales, automation will enable it all with ease across the board. If a scheme is not working well, no one needs to wait for the end of the period – automation will make it quick and easy to change schemes on the fly.

Also, if your compensation technology is enabling you to effectively and efficiently communicate compensation and rewards decisions with your employees, this would surely contribute to the ‘fairness’ perception and increase the trust to compensation related decisions. If you can achieve this with the power of automation, this would bring more engagement, productivity and thus higher performance.

Closing thoughts

Add up all monetary and non-monetary values and divide that by the total costs incurred for implementing the software and you arrive at your estimated ROI. Extrapolate these numbers to future years to see how you can continuously derive benefit from using a compensation management tool. 

Given the business impacts at stake, organizations have a compelling business case for investing in a compensation management solution. With the right solution in place, HR teams can shift from a tactical approach to more strategic efforts, including improving the quality of manager decisions about compensation and refining and communicating compensation strategy.

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5 Compensation Management Challenges You’re Likely to Face as an HR

Managing compensation is one of the most difficult aspects of being an HR professional, irrespective of the size of the company. Compensation professionals in the HR department face issues in determining the right pay and relevant perks that recognize and reward employees for the contributions they make to the company.

The operations and processing can take a huge chunk of your time. It is more pronounced in companies with a workforce that spans across different geographies. In smaller companies, the challenges are of a different kind; most small businesses are limited by budget and so the extent to which these companies can go to attract new talent in a competitive landscape while being fiscally responsible to themselves is small.

Let’s take a look at the most common challenges when it comes to compensation management and how you can overcome them.

External competition

We live in an incredibly competitive world where businesses are willing to pay top dollar to get the cream of the crop talent. In order to attract and retain talent, your company must establish a compensation package that’s on par with other companies in the same industry and location. 

There are several market surveys to gauge the right pay for different roles. If you’re constrained by budget, you can innovate by offering attractive vacation time offs, child care facilities, and other benefits that don’t cause a dent on your budget.

Executive compensation

The many nuances of compensation management come into play when deciding the salaries of senior executives. This is particularly important for public companies that need to reveal the salaries of their top 5 employees which might not go well with shareholders and the general public. Even if that’s not the case, the pay packages need to strike a balance between attracting good talent while being acceptable.

Internal equity

Take a pay review and we’re sure you’ll be surprised by the results. Even though the government and businesses strive to achieve pay equity, the wage gap persists. In fact, the World Economic Forum estimates that it will take at least 202 years to close the wage gap.

You should continuously assess your pay gap efforts and create awareness in the senior management to fix this issue. Managing gender wage gaps is something that’s so close to our hearts so much so that we wrote a whole blog about it. You’ll find it here

Gaps in employee expectations

There’s always a conflicting disparity between what the employee expects to be paid and what the organization wants to pay. And, the HR is stuck in between. Also, employees usually don’t take into account the entirety of their compensation package. They only consider the net pay. 

You can bridge this gap by providing total compensation statements to clearly communicate the value of their compensation in its entirety.

Lack of digitization 

Managing compensation and communicating the outcomes is a very effort-driven task. When not done digitally, it can take up to several months from design to implementation and finally to communication and requires a lot of data crunching/ formulas/ sheets on Excel. Obviously, it’s not the best use of your time nor skills. 

Spreadsheets and legacy software force you to focus on administrative details, most of which can be automated by using online compensation management software like Compport. It can simplify your processes, save your time and resources, and enable you to design smarter, engaging compensation plans for your workforce. According to real-life examples with different Compport clients, it has been proven that Compport can bring in 95 percent more efficiency.

Closing thoughts

Your compensation strategy should be connected to business goals and financial data so you can get a complete picture of its effectiveness. When wrongly handled, it can cause a rift between employees and management. Though these challenges may seem daunting, proper planning and diligent efforts can help you overcome them. The right tools will help you move beyond manual work and transactions and focus on what’s important–motivating your employees and building a great culture.

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The Beginner’s Guide to Compensation Management

The payday keeps us all looking forward to it, but it can be intense and distressing for the people processing your salary. If there’s something even more complicated than that, it’s planning and administering the equivalent financial value (called compensation) you provide in exchange for your employees’ work. 

Growing and large businesses need to come up with a process to ensure they offer fair compensation to all employees. They also need to analyze market trends, come up with creative perks and policies. That’s where compensation management comes into the picture.

What is compensation management?

Compensation management is the HR discipline that ensures that the company’s compensation, both monetary and non-monetary, are competitive, fair, and appropriate. It includes designing, implementing, and managing the compensation components that play an important factor in a prospective employee’s decision to join an organization.

The different types of compensation include:

  • Salary 
  • Overtime pay
  • Commission
  • Bonuses
  • Long-term incentives, equity awards
  • Several allowances
  • Health and life insurance
  • Vacation time
  • Retirement savings

Simply put, it’s how a company strategically manages employee compensation and its components so as to attract and retain good talent while staying within the budget.

Why is it important?

According to a study, 38 percent of the employees surveyed say inadequate salary and benefits are the main reason for them to hand over their resignation letters. And 57 percent report benefits and perk are at the top of their consideration factors before accepting a job offer.

Good compensation management is important for any business as it keeps employees happy and the business thriving. It gives candidates a good reason to join the company and existing employees a reason to stay. The organization benefits in several ways by compensation management:

  • It keeps the employees motivated and incentivized to offer their best work
  • Recognition and rewards have a positive impact on employee productivity and help reduce turnover rates
  • A competitive compensation package taking market trends into consideration attracts and retains top talent
  • It helps in creating a realistic budget
  • It reduces conflicts and disputes and creates organizational harmony
  •  
  • The 4 main objectives of compensation management

The main objectives of compensation management are to ensure pay equity, reward productive employees, retain employees, and comply with legal requirements.

Equity 

A transparent, well-structured compensation management plan ensures pay equity and there are no wage gaps based on gender, ethnicity, or race.

Rewards and recognition

Employees need to be motivated and incentivized to take on challenges and perform better. They also need to feel valued and their contributions acknowledged to address their psychological and social needs.

Attraction and Retention

Employees are the most valuable resources for any company. Effective compensation, based on the performance, potential, and qualifications, should be administered so employees don’t feel compelled to leave the organization based on monetary factors alone. Also, it needs to be competitive enough to attract top talent.

Legality

A good compensation management system considers legal challenges and governmental regulations and ensures that proper compliance requirements are met.

Challenges in compensation management

Designing a fair compensation plan that accurately reflects an employee’s worth is a challenge by itself. Apart from that, HR professionals are faced with several other challenges:

Disparity with employee expectations

The biggest challenge in compensating employees is achieving fairness. Organizations seek to optimize their costs as they can. But, employees want the best compensation possible, either adequate or higher than some comparable standard. 

Fairness is a subjective term. What the organization deems appropriate and fair might not seem like equivalent remuneration to employees for their time and work. Because of this perceived imbalance, both parties will act to correct this disparity.

Keeping up with market trends

Another challenge of compensation management is keeping up with market trends and coming up with a competitive pay structure for the multitude of roles in the organization. You need to make informed decisions based on the salary market data, location, industry, and company size.

Growing employee needs 

It may be surprising to someone from a previous generation that the current workforce seldom gets any pension. 90 percent of millennial employees reported in a survey that they prefer additional benefits and perks over a pay raise.

The needs of employees have evolved over the years and HR professionals need to come up with creative policies and perks, sometimes offering tailor-made packages to meet employee needs. Some of the most common benefits these days are unlimited vacation days, child daycare, flexible work hours, and well-being benefits.

The components of a solid compensation management plan

Your strategy should serve as a guide toward fair and transparent compensation payments. A proper plan should Some of the elements used to decide how much compensation every employee receives are:

Pay structure 

HR professionals use specific approaches when coming up with compensation for a particular role. Sometimes it involves creating pay grades, based on complexity and scope of the job, qualifications and experiences required. It’s also a common practice to enforce step increments that act as markers for salary increments. They decide on the base salary, bonuses and commissions, if applicable, equity in the company stocks, and other non-monetary perks.

Salary statistics

Once the pay structure is complete, you need to gather data to see competitors in the same industry are paying their employees. You need to consider the average salary, cost of living in the location, inflation statistics, and more. This justifies to the management and the employees why they’re paying the compensation they get.

Job evaluation 

You’ve got the foundation of your compensation management plan ready now. You need to analyze the roles and responsibilities of the different job roles in your organization to narrow down suitable compensation for each role.

Job description

The job description not only shows the tasks that are expected of an employee, but also denotes the level of difficulty and the uniqueness of a specific role. This forms the why behind your employees getting a certain compensation for the work they do.

Best practices to manage an effective compensation strategy

Compensation management should follow a scientific, structured approach for it to achieve its objectives. It should be fair and transparent. 

Allocate proper budget

Your compensation budget needs to be in line with the organizational strategy and vision. The budget determines how much of the total compensation budget will be spent on salary and what percentage will be spent on benefits and other incentives.

Develop salary ranges

With the compensation plan in place, you need to come up with upper and lower limits for salaries to get a competitive edge.

Ensure legal compliance

Some countries have minimum wage laws and you need to make sure that your pay structure meets such governmental requirements.

Use the necessary tools

If your business is small and you have less than 10 employees, it doesn’t pose a huge challenge. You could use spreadsheets to track the different aspects of compensation. As your workforce grows, it becomes less efficient. You’ll have to use total compensation management software like Compport to help you with budgeting and compliance.

Document your compensation strategy

The strategy serves as a guide and should be outlined in a written document that clearly articulates the organization’s approach to managing employee compensation.

Review the plan regularly

A compensation plan is not set in stone. You need to go back to it once in a while to make sure it reflects the current market trends. The goal of the audit is to pay attention to market changes, how competitive some jobs are, and what external markets are demanding.

How can Compport help you?

The abstract concept of compensation management is not a challenging one; its successful implementation, on the other hand, is a different hurdle. 

Designing, managing, and monitoring compensation plans can be a complex and time-consuming HR activity. You need to analyze pay scale data, keep up with workforce trends, optimize your budget, understand the expectations of your workforce and come up with unique selling points for your organization. Managing each aspect manually is practically impossible. That’s why you need compensation management tools like Compport.It can help with automating salary review, bonus, sales incentive and long-term incentive processes aligned with your compensation policy and budget. The software is designed to give HR professionals a 360-degree view of employee data needed to make smarter and data-driven decisions. It can help you to reduce your overall time-to-process by 95 percent. Get your free demo today and see the difference it can bring to your organization.

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Compport Advisory Board

Compport Advisory Board

We are very excited and proud to onboard some of the strongest minds as part of our advisory board. This step is a key milestone in our vision to “transcend the world of compensation management through digital magic". We are happy to welcome our valuable members of the advisory board:

  • Asher Siddiqui (Advisor – Investment, M&A Strategies and Financial Excellence)
  • Emre Tok (Advisor – Growth & Global GTM Strategy)
  • Erdal Bozdogan (Advisory – Branding, Marketing & Customer Experience)

Asher Siddiqui (Investor / Advisor / Mentor)

A growth-stage investor, a significant shareholder in 500 Startups, dividing his time between Dubai and San Francisco. Asher has ~20+ years of experience in mergers & acquisitions, venture capital, portfolio management, capital raising, restructuring, corporate innovation, and startups.

Asher was Head of M&A and later Head of Venture Capital at Etisalat Group where, for 10 years, he was part of the management team that led the transformation of Etisalat. He led ~36 advanced stage TMT deals valued at ~$34bn+ and closed ~20 M&A and CVC transactions valued at ~$7bn+.

Asher is currently also active in several non-executive roles, and is a board member, advisor, or member of the board of advisors to several Silicon Valley-based VC firms, GCC-based corporations & PE Firms and a Silicon Valley-based think tank.

Asher started his career in the late ’90s and founded several startups in the U.K. and in the US. Asher has a BA with Honors in Business Administration and an MSc in Software Development, and as a life-long learner since 2005, he has participated in several development programs led by MIT, Harvard, INSEAD, and Stanford Universities.

Asher has experience from both the LP and the GP side of the table and continues to advise both LPs and GPs in deploying capital into venture.

Emre Tok (Growth Marketing Consultant, Investor)

Growth marketing consultant with 21 years of experience in Product Marketing, Development & Management, Digital, Customer Analytics, Growth, and Internet Business Development.

  • Former VP of Growth Careem (acquired by Uber for $3.2 billion)
  • Ex-Microsoft Product and Partner Marketing Leader for the UK
  • Ex-Turkcell Product and Marketing Head (Leading TELCO in Turkey)

Emre has embarked on many successful projects in multinational companies in UAE, the UK, and Turkey. He has worked with industries covering direct-to-consumer brands, technology start-ups, media, SaaS, MaaS, B2B, and much more.

He tries to excel in delivering high impact technology innovations to internal and external audiences within and beyond KPIs and ROI. His leadership has led and participated in various business transformations such as:

  • Leading the holistic strategy for customer growth in the first unicorn of MENAPT region,
  • Leading the product partner and marketing activities for the 2nd largest search engine in the UK, Bing.co.uk

Emre is currently also active in several non-executive roles, and as a consultant, member of the board of advisors to several start-ups. His core focus is on helping organizations to achieve their full potential through full-funnel marketing. He is an industrial engineer with an MBA and is most proud of the talented teams that he has built.

Erdal Bozdogan (Global Business & Marketing Leader, Medical Doctor, Photography Artist, Blogger)

Business leader and marketing expert with 20-years of experience in the pharmaceutical industry, with a deep know-how of US and Emerging Markets.

  • Former General Manager of Takeda Turkey
  • South Asia, Middle East, Turkey and Africa Oncology and Osteoporosis Marketing Leader of Eli Lilly
  • Oncology Regional Commercialization Leader, Emerging Markets of Eli Lilly and many other roles

Erdal has delivered commercial strategy development in product launch at the national and regional levels coupled with operational leadership in the delivery of strategy and customer experiences. He is a Master of Marketing, Branding, Customer Journey/ Excellence, and highly experienced in managing large teams and P&L in turbulent times.

He is a Doctor of Medicine, as an individual with diverse areas of interest, in 2019 he has studied Photography in New York Film Academy and as an artist he had his first personal exhibition in Paris. He is currently studying Sociology and Artificial Intelligence and writing disruptive anecdotes on his own blog.

Outstanding results come from a passion for winning, serving customers, diversity, developing and inspiring people, and having fun in the job. With 20 years in business behind him, he defined himself as a positive leader and dedicated himself to develop people. For him, “Success comes much more easily when we’re passionately engaged and positively inspired by what we’re doing and where we’re going”.

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Blogs

How to manage Gender Pay Gap?

How to manage Gender Pay Gap?

The gender pay gap is the difference between men’s and women’s median annual earnings from full-time, year-round work. It is a measurable indicator of inequality between women and men.

The International Labour Organization (ILO) estimates that women on average continue to be paid about 20 per cent less than men across the world. There are large variations between countries, from a high of over 45 per cent to hardly any difference, please see the figures below for different economies.

Most governments are trying to guarantee equality of treatment between men and women in remuneration. Yet, the gender pay gap persists and the World Economic Forum estimates it will take 202 years to close the global gender pay gap, based on the trend observed over the past 12 years.

What can we do to Close the Gap?

The very first step should be:

  • Undertaking a gender pay review to assess whether there is a gender pay gap and to what extent? This review/ assessment should be a continuous effort not something that we do at the beginning of the year while we set some KPIs and at the end of the year while we are reviewing the achievement level on the set measures. Regular pay gap assessment should be followed with the second step which is:
  • Creating awareness and flourishing a culture where leaders/ decision-makers in the organization own and put effort to fix it. If the leaders assume the accountability, promoting a gender-inclusive culture while adopting a holistic approach to equal remuneration for women and men for work of equal value; making equitable salary offers to men and women, it would be an easier mission to achieve.

Another essential step for HR & Leaders in the organization should be:

3-Having a strategic plan in place and acknowledging the fact that it requires time/ effort to manage gender pay disparity, there is no magic wand to close the gap in 1 month/ quarter or a year. The amount of time required would depend where the organization stands at the start point. Keeping eye on core metrics/ insights should be an integral part of your strategic plan, below are some of the sample KPIs that may find value in tracking:

  • Gender Diversity (Male/ Female Ratio)
  • Gender Recruitment (& Candidate) Rate
  • Gender Promotion Rate
  • Gender Turnover Rate (voluntary & involuntary)
  • Salary Growth/ Genders (across various levels)
  • Salary Competitiveness/ Genders (across various levels)
  • Gender Successor Rate
  • Managerial Role Distribution Across Genders
  • Leadership Role Distribution Across Genders
  • Engagement Level/ Gender

Setting KPIs, tracking them with real/ live data can be only effective when it is digitized, especially for Mid & Large Enterprises, you can find some more ideas in Compport Analytics section.

Once pay gaps are seen and understood, then begins the work of deciding how best to address them. But that work will pay off. By investing in pay equity analysis and relevant analytics/ KPIs, companies can begin to close their gender pay gaps, and realize the benefits.

The ILO estimates that reducing the gap in participation rates between men and women by 25 per cent by the year 2025, could raise global GDP by 3.9 per cent, or US$5.8 trillion.

To make that happen, we are responsible, we are all accountable. Pay Equity is the topic which was supposed to be handled as on yesterday so better handle it today.

*For more insights feel free to connect with us anytime, support@compport.com

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Blogs

Understanding Gender Pay Gap

Understanding Gender Pay Gap

The gender pay gap is the difference between men’s and women’s median annual earnings from full-time, year-round work. The International Labour Organization (ILO) estimates that women on average continue to be paid about 20 per cent less than men across the world. There are large variations between countries, from a high of over 45 per cent to hardly any difference, please see the figures below for different economies.

The gender pay gap is a measurable indicator of inequality between women and men. Most governments are trying to guarantee equality of treatment between men and women in remuneration. Yet, the gender pay gap persists and the World Economic Forum estimates it will take 202 years to close the global gender pay gap, based on the trend observed over the past 12 years.

What causes the gender pay gap?

Under-representation in leadership: Far fewer women than men are in management and leadership positions, especially at higher levels. This brings down the average salary of female managers compared to that of male managers.

Working hours: The gender pay gap is often a consequence of the different patterns of workforce engagement by women and men. The ILO highlights that women work on a part-time basis more than men do. This is often linked to women taking on more of the unpaid family responsibilities.

Career breaks: Women more than men are likely to take career breaks from their employment in order to raise children or care for the family. This means that when they return to work, they are likely to have fallen behind in advancement and in remuneration.

Education: Women still lag behind men in STEM areas that are associated with higher paid jobs. Even when women are qualified in STEM subjects, it can be challenging for them to obtain and maintain a job in these areas because they are traditionally male dominated.

Feminized jobs: Occupational gender stereotyping results in certain jobs being held predominately by women, and that leads to “female jobs” being undervalued for purposes of wage rate determination.

Benefits of closing the gender pay gap?

The benefits of women earning the same as men include an increase in their purchasing power which in turn helps stimulate consumer spending and the economy. According to a research conducted by ILO, across all economies that increasing gender participation adds a significant amount. The ILO estimates that reducing the gap in participation rates between men and women by 25 per cent by the year 2025, could raise global GDP by 3.9 per cent, or US$5.8 trillion.

What can organizations do to close the gender pay gap?

As a first step, recognition of the business benefits of improved gender diversity at all levels is critical as well as commitment from top leadership. More specific actions can be:

  • Promoting a gender-inclusive culture while adopting a holistic approach to equal remuneration for women and men for work of equal value.
  • Making equitable salary offers to men and women.
  • Undertaking a gender pay review to assess whether there is a gender pay gap and to what extent – conducting regular pay reviews can help a company keep on top of any inequalities.
  • Making jobs more flexible so that more women access higher-level jobs and, therefore, higher pay.
  • Ensuring that unconscious gender bias does not affect performance reviews. Selecting and applying a job evaluation methodology to assess the skills and responsibilities of the various jobs in the organization with a view to adjust job titles, contents and corresponding pay overtime.
  • Sharing the effort, results and benefits with the stakeholders in the organization’s ecosystem and being an inspiring example for others.

Ref: This brief is based on findings from the ILO report on Women in Business and Management: The business case for change (Geneva, 2019)

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Blogs

Why the Demand for a Compensation Software is Increasing?

Why the Demand for a Compensation Software is Increasing?

According to various market researches done by several intelligence companies, the Global Compensation Software Market is expected to grow at a CAGR of 9% during the forecasting period of 2019-2026.  More than 50%+of the market share is originated from the Americas and the market in APAC is expected to register highest CAGR.  And Small/ Medium size enterprises are expected to show higher growth rate in demand than Large enterprise segment. In 2018, on-premises compensation software accounted for the significant share in the global compensation software market however demand for cloud-based compensation software is growing sharply and it is expected to witness the growth of over 12%, during the forecast period, which is higher than the overall market CAGR.

What are the key drivers in the Market? What is Changing?

Highly Attractive Benefits Offered by Compensation Software:

The benefits offered by compensation software, which includes optimized utilization of company revenue, enhancing positive reinforcement, boosting of employee performance, and improving company reputation during talent acquisition are expected to fuel growth in the market. On the other hand, automated compensation management process simplifies administration processes by reducing errors caused by manual work coupled with saving organizations’ money and time while improving efficiency and productivity.

Increasing Competitive Edge:

A smart compensation software helps organizations to take their strategy beyond numbers and budgets. It ensures that the incentives provided to employees are in line with the recent market trends, which helps organizations in maintaining low attrition rates. Moreover, employers can also identify top-performing employees by their work management, thus rewarding such employees for their effort. Also, it improves the workplace environment of the company, which plays a significant role in the performance and productivity of an employee. Thus, more companies are looking to adopt compensation software tools into their organizational activities to attract and keep top performers, build a solid employer brand and ultimately to sharpen their competitive edge.

Technological Advancements and New User-Friendly Software Launches by Market Players:

There is a clear shift from Core HR Suite to end-to-end Compensation Software since organizations do not want to rely on their core HR Suite and compromise their compensation strategy. A typical HR Suite can only manage certain aspects of a typical compensation process; thus, companies still manage some part of their processes offline, basically through traditional spreadsheets. But with the technological advancements and the smart offerings by “boutique' compensation software companies, the rules of the game are changing, more and more companies shifting their compensation processes out of their HCM.  Unlike HCM market, approximately one quarter of the Compensation software market is dominated by major global vendors who offers full HCM suite, (for HCM market it is more than 50%). The concept of ‘integration’ is surely helping this change, most of the compensation software can be easily integrated to ERP/ HRIS and allows organizations to leverage their investments in existing processes and systems.

Conclusion:

Nowadays, for any size of enterprise, for any type of compensation process, for any set of expectation, there is a compensation software available in the market. It is “the time” to manage employee compensation with confidence; the right tool can bring data intelligence, workforce agility and administrative efficiency to human resources while providing transparency of all compensation detail for reporting, total compensation statements and letters, and audit/ compliance reporting.

There is a compensation software out there which would help you to optimize the utilization of company revenue, to enhance positive reinforcement, to boost employee performance and engagement. Wishing you all the success and highest return on investment. For any queries/ feedback please feel free to reach out.

Thank you

Senem.Birim@compport.com

Co-founder/ Managing Partner Compport

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Blogs

What is the Likely Recovery Path? If the Covid-19 Induced Recession is on the way

What is the Likely Recovery Path?

If the Covid-19 Induced Recession is on the way

Last week’s brutal drawdown in global financial markets might seem to indicate that the world economy is on a path to recession. Does the market drawdown truly signal a recession, how bad the recession would be, etc? We do not know the answers yet, but there is one thing we know is that we all need to have a Recovery Path. Most of the companies started to initiate some actions, and mostly they are employing several cost-cutting measures, such as:

  • Pay cuts and reduced bonus pay-outs
  • Deferred pay increase or no increase this year
  • Asking employees to take unpaid leaves
  • Freeze on hire for indefinite period
  • Terminate consultancy spend and temp consultant contracts immediately
  • And 70% organisation plan to invest more in technology

Above initiatives and some others would probably drive employees into the “fear of recession” and boost the ‘feeling of insecurity’, and obviously none of them would help the organizations to succeed in the current environment. Here are some of the key suggestions we would like to share.

Walk the talk: We all have heard that some of the CEOs have taken pay cuts. Now this is a fantastic first step, one that makes them a normal human as any other employees. Organisations taking any of the above steps for their employees have to make their employees feel that CEOs and Presidents or top management is part of them and equally contributes to manage the difficult time. Perhaps I would recommend higher % cuts at the top down compare to lower levels considering the contribution in terms of real value would be more. Also the fact of life is that beyond a reasonable career level, we all have secured our future for such difficult times but it is not the case for the front line staff which is earning and spending on month-to-month basis.

Connect with your employees: If you are a CEO or a management team member who was continuously communicating company’s success, challenges, future, etc. regularly, do it more. If not, start doing it more often than ever. It is the perfect time to build that real connection between organisation, it’s leaders and employees, that will last forever in maneuvering through such difficult times. Share the past success, current challenges and future perspective TRANSPARENTLY and more importantly ask them how they can contribute to ensure that they don’t loose the momentum of life and keep their motivation high. Give them courage, support, environment and channels to continue performing at their best in whatever way they can and use these channels yourself e.g. using technology to connect. Create whats app or any other chatting platform group led by the CEO herself/himself and keep the nerve of the organisation all the times. Keep sharing and reflecting your perspective, may be on daily basis. If as a CEO or top leaders, you will have to do a half an hour call every week with all your employees, do so. Ultimately you are saving time to go and come back from office, use it wisely.

Share the pain, to have collective gain: There are tons of ideas floating around to manage the costs – read them, understand them, see what is useful and apply them without wasting any time. One of the best is to replace the pain of “cutting the headcount” with “Sharing the pain together”. While things were normal, we were always looking forward to creating more and more ideas to motivate our employees. Today the only motivation employees need is that their job is safe. Built trust by giving this motivation to them while you can do a lot of other things to save costs.

More importantly, split yours cost saving ideas into two parts, one for immediate actions and others as permanent fixes. It is extremely important that we learn our lessons from this difficult time and try to be conservative in spending now and in future. Here is my take on them, which includes are collection of various ideas already ..

There are tons of intelligent minds out there which can further add to this list and not necessary all organisations have to take all the steps collectively but think aloud, engage wider audience and start taking actions on now is the key here.

In nutshell, this is not an easy time, for any country, any industry. Plan for the best and prepare for the worst. It is our collectively efforts with just few intelligent moves, very quickly, that can convert this dim and sluggish time to a progressive and smart future for all of us.

Stay Safe

Sachin Bajaj, Founder & Managing Partner Compport