How to compensate employees is a crucial question for any business, but it’s even more critical for a small business that doesn’t have a lot of extra cash to throw around. As a small business owner, just keeping up with changing regulations on the minimum wage and overtime rules may seem like enough to worry about, but taking a little time to think more strategically about compensation could pay off big in the long run.
Understand your competition
Pay is just one part of compensation. Most small businesses also offer paid time off to their employees: 73% offer paid time off to full-time workers, and 67% offer two or more weeks. However, most small businesses (86%) handle time-off requests for new parents or people caring for sick family members on a case-by-case basis, so having a formal policy for family and medical leave could help you compete for talent. NFIB research
Small employers are also looking out for their workers’ work-life balance: 71% of small businesses allow full-time employees to work a flexible schedule. Work flexibility is now the benefit workers prefer most, so this is a great way to retain your best employees. NFIB research, Fortune
One way to stand out from the pack might be to offer a 401(k) or another retirement savings plan. Only 38% of small businesses are helping their staffs save for the future. NFIB research
Use pay to motivate your staff
You know that money is a great motivator. But did you know that people are more productive when pay is transparent? Creating a transparent pay policy that your whole staff can see and understand will boost their productivity. The University of California at Berkeley
Commissions, bonuses, profit-sharing, and other incentive plans can also be great motivators that align your employees’ interests with yours. It’s best to keep incentive plans as simple as possible, and to avoid putting caps on how much people can earn. Use the Commissions app to design and track a simple incentive-pay system for your staff. The Reporting app can also help you track revenue and expenses to make sure your incentive pay is working to help you hit your goals. Harvard Business Review
High-achievers are easier to motivate. They can hit aggressive goals while working towards an annual bonus. But your lower-performing workers will need to get rewards more often to stay on track. Bonuses should be distributed quarterly to keep motivation high for the lower-performing members of your team. Harvard Business Review
Money isn’t everything
Turnover is a big problem for a lot of small businesses, but money isn’t the only way to encourage your employees to stick with you. At fast-casual restaurants, 98% of employees who get education benefits like tuition assistance will stay put, compared to 73% of employees who don’t get this benefit. US Chamber of Commerce Foundation
Rewarding your best employees with promotions and showing them there’s room to advance is another great way to retain talent. Workers who stay in one job without a title change longer are more likely to leave their current employer. Harvard Business Review
The majority of workers say benefits and perks are crucial in their decision to accept a new job. Health insurance, paid time off, performance bonuses, and retirement savings are the most important benefits to employees, but non-monetary perks also play a big role in keeping workers happy. Consider negotiating a discount at a local gym, giving employees a voice in your business’s charitable contributions, or simply bringing in free food. You may not be able to afford an on-site chef, but Bagel Friday can still do a lot to boost morale. Glassdoor, Fast Company[image: Salary by Evan Jackson on flickr]
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