Top 10 Symptoms of an Ineffective Compensation System

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Developing an effective and efficient compensation system is an important part of any successful company. An appropriate compensation system can help attract and retain top talent and help the organization accomplish its business goals.

It is important to ask yourself, if you have an effective compensation plan at your organization. Check out our article below to learn what some of the key symptoms that may be causing the weak links in your current compensation system.

1. Loose budget oversight

Loose budgetary controls means that not all expenses are accounted for in the right ways. These can lead to a whole host of problems when combined with setting goals for the future based on those numbers. This also means that your compensation cost will be much higher than normal but could’ve been prevented with a few minor adjustments.

2. Retention rates below industry average

“There goes another one.” Don’t let that be a common phrase around the office. Make sure your compensation plan is well developed to keep employees around longer.

3. Company has outgrown it previous compensation structure

Growth is great! Just make sure that your compensation system grows along with it to keep all those around who helped it grow and keep them excited to continue that growth.

4. Compensation umbrella approach

Umbrellas are good for the rain but not for compensation systems. If you are operating in different regions just be sure to check out the regions employment laws to make sure you are able to provide employees with the best compensation structure possible.

5. Inadequate job documentation

Make sure that existing and new employees can easily find information about their jobs. Also having this all this information organized can make planning and hiring a smooth process.

6. Job description mismatch 

This one goes along with inadequate job documentation. If employees thought that they were being hired for a certain role based on their job description but are then consistently asked to do something different, then this could lead to many problems. Make sure to always review and update all job documentation and descriptions to alleviate this problem.

7. Slow recruiting

Are people not getting on board as quickly as they used to? Salary and other compensation are at the forefront of a candidates mind. Don’t lose a great candidate to overlooking this point.

8. Relaxed performance appraisals

Make sure those performance appraisals really mean something. Making sure that the employees goals and activities are aligned with the company’s can really make performance appraisals insightful.

9. Employees using more sick leave than in the past

Are they sick from the flu or sick of work? Higher frequency of sick leave could mean that employees are trying to avoid work. Pay could be the motivator for this problem so be sure to have a strong system to track how often this is occurring to get a clear picture of the situation.

10. Rewards system is limited

If a rewards system is a major part of your compensation system, it can make employees feel like they really earn something great if they are a top performer. Ensuring that those who really excel are rewarded can encourage others try to excel as well.

Could your compensation system be fine-tuned?

 Employers Group can help.


Developing an efficient and effective compensation system is critical to attracting and retaining talent.  Since 1896, Employers Group has been working side-by-side with employers to help them tackle big issues facing the work environment.  Use the experts at EG to help you develop your compensation system; saving you time, money, and aligning your compensation system with your business goals.

Don’t let another day go by with these problems slowing you down. Follow the link below to get more information on how you can take advantage of Employers Group’s experience and services.

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