Balancing Compensation and Benefits to Improve Employee Experience 

Use these findings to create a well balanced Compensation and Benefits policy and increase your employee productivity, retention and more.

October 31, 2020 By Sara Ana Cemazar Share on Twitter! Share on Facebook! Share on LinkedIn!


compensation and benefits


Compensation and Benefits are the most important aspects of every employees’ wages. Fair compensation represents the basis upon which other rewards elements can be built, while benefits themselves sometimes overweigh the compensation. 

In this article, you will find out how to balance Compensation and Benefits to achieve relevant KPIs – employee retention, productivity, wellbeing and more. Also, you will find out what are the most sought-after benefits and how to provide competitive compensation according to your market. 

📘 Before we start, get our Employee Recognition Solution Buyer’s Guide to help you choose your recognition software – a powerful partner on a path to your employees’ success. 

Importance of Compensation and Benefits 

HR Professionals often look at different workplace aspects and try to determine their effect on employee experience, satisfaction and productivity. While employee recognition, feedback and communication have significant impact on these key employee metrics, they are all built on presumption of fair compensation and benefits of value to employees. 

Therefore, Compensation and Benefits are two main pillars of every Total Rewards strategy. It is important to understand that shiny perks like Pizza Fridays or pool tables at the office cannot substitute fair compensation and benefits that employees find useful.  

Also, a well-balanced Compensation and Benefits system is crucial to attract new talent, with 67% listing salary and 63% listing benefits as top factors when choosing a job. 

employee benefits

How to Ensure Fair Compensation and Benefits 

There are multiple nuances when it comes to ensuring fair compensation to your employees. What we know from research is not only that employees are more engaged when they are paid more, but also that employee engagement is improved when compensation policies are transparent. In other words, your employees’ perspective on fairness of their compensation is equally important as the pay they actually receive. 

Follow these steps to ensure fair compensation to your employees. 

1. Conduct job analysis and evaluation 

In order to compare your employees’ work responsibilities and outputs, you need to analyze them first. Therefore, create your employees’ job descriptions and goals according to existing data and with the help of your managers and employeesClassify and rank your employees’ positions and tasks to generate hierarchy according to which your employees should be compensated.  

Furthermore, analyze your market! Check Glassdoor or other relevant country-based sites to see the range of salaries for certain positions and if your company provides market-competitive salaries. 

2. Use pay structure 

After classifying and ranking your jobs according to internal structure and the market, you should create pay structure. Most companies use minimum compensation as a base on which grade ranges are added. The compensation grade ranges should reflect the before mentioned structure, i.e. job responsibilities and market values. 

3. Survey your employees 

Employee surveys are often used to find out employees’ opinions and feelings on a subject. They can help you find out if your employees think they are being paid fairly, among other things. It is crucial for you to react to certain sentiments before they accumulate into bigger grievances.  

Do not be surprised if your employees believe they are paid below their range – according to researchonly 33% of employees think that their organizations pay them fairly. 

fair compensation and benefits

📘 Read these employee survey questions every employee should be asked. 

4. Investigate legal framework 

Of course, your compensation should always be law compliant. However, every state has their own regularities when it comes to base pay and other monetary awards like bonusses and tax-free exemptions. Find out how your company can provide the biggest monetary value to your employees but be cost-effective at the same time. 

5. Communicate your compensation policies and market research to your employees 

As said before – your employees’ perspective on competitiveness of their salaries is very important. Your employees need to know that their salary is adequate according to average compensation for their position on the market, and they need to know how their salary is composed according to your pay structure.  

📘 Use some of our employee communication best practices to regularly communicate pay transparency to your workforce. 

Most Desirable Benefits 

The list of possible Compensation and Benefits combinations is endless. Although compensation is the biggest factor in attracting new employees, these three benefits are equally if not more important to employees 

compensation and benefits

In some countries, health insurance and paid time off are guaranteed by the labor law. However, in countries when legal protection lags behind, these benefits are also very commonly offered to employees. 

Here are three most common and most popular employee benefits. 

Health insurance 

Luckily, health insurance is a part of Compensation and Benefits package that is becoming the norm. As data shows, 90% of employees in the US in large and mid-sized businesses are offered health benefits. It is no wonder that this employee benefit is the most popular one since it offers security that is often very costly. 

Flexible work 

Here is an interesting finding: 37% of Millennials would take up to a 12% salary cut in order to work for a company that offers flexible hours. Of course, some jobs simply cannot be moved online, but as recent world pandemic has shown – a lot of jobs can be performed from home without any productivity losses. 

📘 Find out all the benefits of remote work. 

More vacation time 

Although paid vacation is usually part of Compensation and Benefits package, employees are asking for more of it. This is no wonder since US employees get on average 10 paid days off. At the same time, number of paid days off is much higher in some European countries. 

employee vacation time

Moreover, employees want more vacation time in order to achieve a better work-life balance. The popularity of other employee wellbeing benefits has increased, too. 

Employee Benefits That Make a Difference 

There are some employee benefits that are not that usual but can prove to be very valuable for some employees. Considering that different employees have different responsibilities and personal obligations, they will appreciate different benefits. 

Consider including these benefits into your Compensation and Benefits portfolio – they might end up being one of the most important aspects of your employees’ experience. 

Company cell phone and laptop 

If your employees are working remote at least some of the time, it is especially important to provide them technology to do their jobs efficiently from anywhere. Moreover, if your employees talk with customers, you should ensure they have cell phones. Allow them a personal use of these technologies – this will save your employees resources without being too much of a cost to you. 

Company car 

Allowing your employees to drive company cars in their private time can make a huge difference. For employees that do not own a car but have families, this can prove to be the most valuable benefit of all. 

Holiday bonus 

Did you know that 60% of Millennials say their primary reason to work is the ability to travel? Moreover, 52% are already saving for a vacation. Considering all this, holiday bonuses could prove to be a real attraction magnet for Millennials and Gen Z in the workplace. 

compensation and benefits Millennials

Meal reimbursement or free meals 

Not only can offering meals be cost-effective, it can also improve your employees’ satisfaction. Peapod’s research shows that in companies that do not offer free meals, 56% of employees are very happy at their jobs, while this is true for 67% of employees working in companies that offer free meals. 

Employee development 

Employee development is considered an attractive trait in an employer according to 52% of Millennial and Gen Z workers. Although it is a standalone category of every Total Rewards strategy, employee development is often neglected and it can cause increased employee turnover. Therefore, ensuring your employees have their own, designated employee development plans can be a huge benefit in the eyes of many employees. 

Recognition and rewards programs 

Employee recognition programs can be seen as a benefit, especially monetary ones. Employees collect points that can be redeemed for their choice of gifts and experiences, and this creates value for them. Some companies are famous for their rich recognition and rewards programs and are successfully using them to retain employees and attract new ones. 

Advantages of Balanced Compensation and Benefits Policies 

A well designed and implemented Compensation and Benefits policy turns out to be a company’s biggest asset when it comes to achieving business results. Why? Because employees that are satisfied with their compensation and benefits work harder to not only keep their jobs, but also advance in your company and receive even better compensation and benefits. 

Let’s break it down to see what some of the specific advantages of balanced Compensation and Benefits Policies are. 

Reduced employee turnover 

Employee retention is often one of the main HR teams’ KPIs. There is a vast majority of elements that play into employee turnover – like seasonality, personal reasons and more. However, by offering balanced compensation and benefits, employers can strongly influence retention. For example, 82% of employees say they are less likely to leave if they had more flexible jobs. Moreover, research shows that 10% increase in base pay increases the chances of employee retention by 1.5%. 

compensation and benefits

Making a company an attractive employer 

We have already explained how some benefits might make your company attractive to candidates of certain age. In sum, competitive salary and benefits that stand out from your competitors can give you an added value in a candidate-driven recruitment market. 

Improved employee motivation 

Employee motivation is a powerful driver of employee productivity. Although a lot of factors influence employees’ motivationfair compensation and valuable benefits are at the utmost core of employees’ everyday stimulus to do their best work. 

Increased work-life balance 

A lot of employee wellbeing benefits help workers achieve a good work-life balance. For example, remote work possibilities or gym reimbursement can help employees stay healthy or spend more time with their families. Ultimately, employees will appreciate employers that allow them to unplug and spend their downtime in a non-work-related way. 

📘 Find out in what ways HR can ensure work-life balance for remote employees. 

Increased employee engagement 

Employee engagement can be measured with employee surveys that question a variety of employees’ work life aspects. Disengaged employees cost US businesses up to $500 billion per yearso it is crucial for employers to overcome this issue. 

Employee engagement is affected by employees’ personal traits as well as various workplace aspectsCompensation and benefits are at absolute basis of employee engagement, but employers can also engage their workforce better by recognizing their work.  

Check out our employee recognition playbook to see how to implement successful employee recognition programs and improve your employees’ productivity, engagement and more.

employee recognition playbook