The Global Human Resources Outsourcing (GHRO) team is sharing some hard-won business insights directly from the source.

 ”A Practical Guide to Human Resources Management” is a 266-page guidebook to the intricacies of the world of employment from Jeff Stinson, founder and president of Global Human Resources Outsourcing (GHRO).

Chapter 4: How to Make Sure You Pay Them Correctly

PAY – refers to all types of financial rewards and benefits employees receive as part of their employment.

Have you heard of the various studies that show that from an employee-satisfaction perspective, pay ranks somewhere between third and fourth.  These surveys tell us that employees value their supervisor more than pay, or wanting to “have a say in things.

Perhaps this is true, but at the end of the day, when your employee leaves for another job, most of the time money was involved.  So, what can you do about this?

One problem with pay is that the term means different things to different people.  For some, we are talking about an hourly rate.  For others, there may be a bonus involved  or even stock options.  This Chapter focuses on the following issues relative to pay:

• Definition of what pay really is
• What a pay system’s objectives should be
• A typical pay model
• Elements of a sound system – internal equity, external equity, and employee equity
• Strategic alignment of pay to the business
• The concept of total rewards
• Some thoughts on base pay and bonuses

What are you really trying to achieve with your pay system?

• Attract and retain employees
• Motivate
• Promote skills and knowledge development
• Shape corporate culture
• Determine and control pay costs

Job evaluation, which affects base pay and bonus considerations, is the process of systematically determining the relative worth of jobs to create a job structure for the organization.  There are essentially three ways to conduct a job evaluation:

• Job Ranking
• Job Classification
• Point-Factor Method

Each of these methods has its advantages and disadvantages.

Your culture and business objectives define compensation packages (not the other way around).

There are many advantages to making a bonus a significant part of an employee’s pay.

Next: Chapter 5 – How to Select the Proper Benefits Program