The world has changed. There are more job openings than talent available. Employees have more leverage than ever in negotiating their compensation. The tables have turned.
I just got a call from a rock star “A Player” employee who wants to leave the company because the company is not compensating this Star employee adequately. This is more and more common.
I hate to see employers surrender great talent because of a simple compensation issue.
Here are 16 ways your company could compensate employees. Some obvious, some not so obvious.
You can raise the employee’s base salary.
You can raise the person’s hourly rate. Pay by the hour is usually for a 1099, not a W2. The rate is pre-determined by contract.
Flexible work options.
You can offer the employee choice of working on-site, remote or a hybrid. You can offer the employee a 4 day work week.
You can give the employee more stock options and/or accelerate the vesting schedule. Stock Options usually vest over time but vest immediately in the event of a “change of control”.
You can give an employee one-time Stock Grants for milestones accomplished. Since the employee will have to pay income tax on these new Stock Grants, it’s best to give the employee extra cash payments to cover tax burden (called “grossing up”).
Cash at Hire.
You can give a newly hired employee a “signing bonus” as as incentive to sign the offer letter, or as a way to cover his/her expenses in changing jobs, or to compensate him/her for surrendered bonuses given up at the previous employer (usually a timing issue).
Cash after Hire.
You can give the new employee a “delayed signing bonus“. Many companies offer a large signing bonus as a particularly enticing component of the compensation package. However, a highly-effective yet often-overlooked compensation strategy is to offer a deferred bonus. For example, offer a $5,000 signing bonus up front with an additional $5,000 bonus granted at the six-month mark. This way the signing bonus works not only as a compensation tool but also as an employee incentive tool.
You can give an employee phantom equity. Phantom equity does not transfer any of your company ownership to employees. Rather, it’s a contractual agreement which gives your employees a right to a certain percentage of the profits/proceeds of your company. This process allows you to incentivize long-term commitment and high performance without giving up any ownership of the company.
Cash for innovative ideas.
Turn your suggestion box into a way to pay employees. Also, publicly pay any employee whose name is cited in a newly issued patent.
Cash for education.
Pay in advance of reimbursement for continuing education. Do not put restrictions on the degree, certification, or learning. Let them chose.
Pay for and encourage employees to join professional memberships. This is a great way for employees to grow their skills in the workplace by attending regular meetings and getting to know others with varying experiences.
This is usually given to sales people or employees who travel greater than 50%. But you can give other travelers a car allowance for $500/month.
Grant your Star employee more PTO days. This costs your company nothing. Payroll expenses are not changed.
For all employees, offer a 401K, either matched on not matched. Even tiny orthopedic startups can take advantage of out-of-the-box unmatched 401K programs for all employees.
Recognition is a no-cost incentive that you can implement immediately. Employees appreciate being recognized for their work because it makes them feel valued. It may also introduce friendly competition in the office, which helps increase productivity. The more “public” the recognition the better.
Rewards can include non-cash gifts, like a gift card or preferred parking. Rewards can be a little more personalized for individual employees by considering their hobbies and interests.
Experiences can work well for teams that achieve a shared goal. Experiences can include team outings, group lunches or team-building activities that all employees participate in. This both builds camaraderie among coworkers and helps the team remain motivated.