Building your team: How to find the right mix of salary and benefits
Your employees are your company’s greatest assets. They’re also an important operating expense, perhaps one of the biggest.
When you’re setting compensation, this is a contradiction you need to understand. You also need to be able to pay the salary that you’re offering for a specific job.
"If it is too high it will impact your cash flow and, therefore, you might have some challenges when you’re planning for an expansion, new machinery or renovations," says Éric Lacroix, Vice President, Total Rewards and Human Capital Management System at BDC.
Laying off employees because you can’t pay their salaries creates anxiety for employees who stay, he says.
Conversely, offering a salary below what the competition is offering could lead to challenges in recruiting the right talent or to employees deciding to leave your organization for a better offer. You need to find the right balance, says Lacroix.
5 tips to build your team
Lacroix says employers should be aware of what kind of compensation-salaries and benefits-is being offered in their industry and how employees will react to what the market is offering. But that’s only a starting point.
These five points are of particular concern for entrepreneurs building their team, according to Lacroix:
1. Not all employees are equal
Treat your employees fairly, while still recognizing that not every employee will make the same contribution to your business. Remember that keeping salaries all the same for a position is not always being fair. This doesn’t mean paying one employee $20,000 and another $200,000 for the same job. What it does mean is that you might pay more for an employee who has more experience, education and expertise, and will add more value to the business.
2. Look at salaries as an investment
Employees are not commodities your can buy or sell depending on your needs. You want them to be a good fit to help your business grow.
Also, keep in mind that the market value of a position could increase over time and you might need to raise salaries as your employees gain additional expertise and skills. If you’ve invested in them from the start, they might be willing to take a bit less money to stay on with a great team and opportunities for growth.
"You need to look at it as any other investment that you will make and be realistic in terms of what it is that is needed to keep the right people," Lacroix says.
3. Be clear about bonuses and expectations
An incentive or a bonus links the success of your organization to your employees. You need to be clear about how employees will earn their bonus, with performance expectations and a specific timeframe. If an employee is not performing, it means that his or her variable compensation will be smaller or not awarded.
Setting goals weekly, quarterly or yearly that are clearly understood by employees is an effective and timely way for them to meet your expectations. Remember that you can’t evaluate what you haven’t communicated.
4. Set the right salary for the right job
Salaries reflect the level of skills, experience and qualifications expected for a given job. You need to state clearly the employee’s role, responsibilities and expectations. You can put these expectations of the job in the employment offer.
5. Explain your benefits program
Employees expect a certain level of benefits-dental, medical and possibly life insurance, and support for retirement savings. Your benefits program has a cost to you and your employees. It must also be administered. Who will do that in your organization? Will you outsource?
Are you going to offer a pension plan? If so, will it be a plan with a group RRSP, a defined contribution (which sets both employees and employer level of contributions) or a defined benefit (which guarantees employees a pension with a specific amount per year upon retirement). If you can’t maintain the cost or support the contribution volatility of a defined benefit pension, look for another option.
Will you offer or sponsor wellness initiatives and programs to promote a healthy workforce and a culture of well-being?
Whatever benefits you offer, you need to take the time to explain them fully to your employees so they understand what it is that you have to offer as an employer. For an employee, there is no value to a program they are unaware of or do not understand.
Look beyond compensation
A 2021 BDC study found that almost 55% of Canadian businesses were struggling with labour shortages. The situation isn’t expected to improve for at least a decade and entrepreneurs will need to compete for employees with more than salaries.
In the context of a labour shortage, do not underestimate all of the non-cash incentives you can offer.
Éric Lacroix
Vice President, Total Rewards and Human Capital Management System at BDC
Remember that paid transit passes and gym memberships are taxable benefits for your employees and they need to be made aware of this for tax purposes.
A health-care spending plan, which allows coverage for health-related expenses not included in employees’ plans or to top up their group benefits, is not taxed at the federal level, but is taxed provincially in Quebec.
Lacroix says employers should offer opportunities for employees to evolve within their organization.
"In today’s world, a promotion should not be perceived just as a move up. It could be lateral, but employees will get new skills and challenges," he says.
You could also offer to pay for courses for your employees, within reason. Or you could offer mentorships or the opportunity to shadow another employee to learn new aspects of the company.
Offer flexibility
Flexible work arrangements are also a possibility. If there are periods during which there is less pressure on production, you could offer time off.
You could let your employees work longer hours between Monday and Thursday to allow them time off on Friday afternoons.
"The number of hours paid is exactly what is expected, but you are compressing them. As an employee, you are not working more hours. As an employer there is no cost to you and sometimes there is even a gain in productivity," Lacroix says.
Develop a culture of recognition
Recognition is something that can be missing from an organization. Employees expect verbal recognition, at the very least. The easiest way to do this is to say "thank you" for a job well done.
You can build a culture of recognition with your leadership or among peers. Congratulate a team member or team for a job well done, not only with a verbal thank you, but with a memo, award, team celebration. People work hard. Do not forget to recognize and celebrate successes. Employees will feel they are part of something.