Determining accurate employee compensation may be difficult, but settling on the wrong figures can hamper employee productivity or spike turnover. So, when employers take the time to create fair bonus systems, paid time off policies and base compensation pay practices, it certainly is worth the effort.

Determining fair base compensation

With the help of aggregating sites such as, employers now have access to market pay data at their fingertips. Such data repositories yield great estimates based upon a variety of criteria including location, experience and job functions. The flip side to this easy access is that your employees probably understand industry standards better as well. New hires will walk into the interview armed with an expected compensation, and if they are presented a different option, employers may be forced to move on to the next candidate.

In establishing organizational standards, large organizations will often create pay ranges for each of the job categories under their umbrella. These organizations then value each job position within those established pay ranges and adjust employee pay rates according to annual job evaluations.

Other organizations use a balanced scorecard methodology that establishes pay ranges based upon how strategic a certain position is for the company. The more valuable the position, the greater the pay. For a majority of companies, however, this method would be more effective as a way to determine bonuses rather than base wages.

Paid time off

In today's competitive market, being able to offer an enticing PTO package can get you a serious leg up on the competition. As high-level players jump from company to company, they often don't have time to accrue much PTO and may want to start off at a higher level than an employer normally would accommodate.

For this reason, PTO policies based on seniority in the industry, rather than within the company itself, are gaining momentum. Though this rewards loyalty less, it prizes experience and can attract real talent to a company.

By granting one lump sum of PTO for employees to allocate on their own, whether it be for vacation or sick leave, workers will no longer need to lie about illnesses to get extra days off or head into work ill because they've crossed the threshold for sick days taken. Instead of paying people to be sick, just combine these days off with regular PTO and allow them to be used however the individual sees fit.

However, for employers subject to the Family Medical Leave Act, they may need to split accrual from other PTO for the sake of accurate reporting.

Tips on incentive pay

It is important to remember that the real purpose behind the bonus structure is to further a company's strategy. Incentives aren't simply paying people extra money to keep them content, but should actually be paying them to produce excellent, targeted results in a predetermined area.

A few tips on awarding bonuses:

• Have a clear organizational strategy in place regarding incentive pay.

• Bonuses should not be given by the employee's manager, but should be granted by a separate party with objective separation.

• Establish practices to ensure accuracy and fairness. Don't fall into a rut of awarding people their maximum bonus every quarter, regardless of how successful they were on their objectives, as this eliminates the reasoning behind the incentive system altogether. Separate responsibilities and ensure that everyone is getting paid effectively and fairly. -E.B.N.

Curt Finch is the CEO of Journyx and creator of the world's first Web-based timesheet application — the foundation for the current Journyx product offerings — in 1997.

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