Compensation is one of the thorniest issues in the workplace. Employees want to know they’re being paid fairly and like to be given opportunities to increase their earnings. If those opportunities aren’t available from their current employers, they’ll eventually seek them elsewhere.

By contrast, some employers view compensation as a cost to be minimized instead of as an investment to be optimized. For others, compensation might be used as a substitute for attentive management, throwing money at people or problems instead of dealing with issues directly.

While paying fair wages and salaries is essential, paying competitively is ideal. When it’s time to develop or reassess your company’s compensation system, here are three smart elements that will help keep you in top talent.

Be market smart

Of course, well-designed compensations plans must align pay with individual job expectations and responsibilities. But what about the market? Without knowing what “typical” compensation is for your industry or region, you could end up offering too much or not enough. Either scenario proves costly.

The first element needed to attract and keep workers is competitiveness. It’s important to find out what the going market rates are and determine what constitutes an appropriate range of compensation for positions in your industry and for your area.

Professional groups, chambers of commerce, and trade associations regularly collect and publish salary data and can provide helpful information about specific fields within your industry. Salary and wage surveys are also available through local employer groups and through the Bureau of Labor Statistics (http://www.bls.gov). Human resources consultants and specialized recruiters are also well-informed and reliable sources.

Wherever you seek out benchmark information, be sure it reflects a picture of your local labor market and takes into account issues like the cost of living for your region.

Be strategy smart

Organizations are increasingly seeking ways to develop equitable compensation plans that also improve business performance. With the right system of short- and long-term incentives, a company can maximize levels of service, productivity, and quality. The key is to create a compensation strategy that aligns with the business strategy.

For instance, companies can develop a pay structure that builds on base pay by linking additional earnings potential to company success. It could include rewarding the acquisition of skills or linking individual and team pay with the overall profitability of the company. Both compensation ideas offer incentives to employees while enhancing the organization’s performance.

Be motivation smart

Beyond salary and wages, you can offer other non-financial forms of compensation. In fact, a good balance of pay, benefits, and other forms of recognition can often create a more appealing offer than money alone.

Additionally, because motivation is different for every employee, some companies are experimenting with cafeteria-style benefits, letting workers select or exchange different parts of their reward packages – more vacation time in lieu of bonuses, for example, or higher bonuses in lieu of that company car.

Ultimately, your system must be designed to meet the particular needs and circumstances of your organization. And of course, no matter what pay plan you develop, it must always comply with federal and state laws.

Wipfli's HR consulting group can help you design a compensation plan that works for you and your employees. To get started, contact your nearest Wipfli office location.