Compensation is an important metric that many employees use to gauge their level of satisfaction within a company and is a form of extrinsic motivation, or that which derives from some external incentive.

Pay Equity

To keep your employees satisfied with their compensation, HR managers should establish a fair means of deciding on salaries and bonuses.

These monetary motivations can be merit-based, tenure-based, or some combination of both.

Merit-based Compensation

When determining which employees will receive increases in their salaries, HR managers must evaluate the overall company contribution that every employee offers.

If an employee has executed his or her position at the company’s standards, at the next salary review, this candidate should be offered some standard, incremental raise.

On the other hand, if an employee is exceeding management’s expectations and is providing the company even more value than anticipated, this employee could be advanced to a higher position within their department and receive a much higher raise.

Tenure-based Compensation

If an employee works in the same position in a company for an extended amount of time, consistently meets management expectations, and provides steady value to the company, this employee should receive a standard raise at every salary review.

No employee should be given increases in their salary solely based on the fact that they’ve been with the company for a very long time. Employees must increase their worth to the company, at least incrementally, to justify a pay increase or bonus.