Pay increase requests are, well, increasing in frequency. And those increases, bring an increase in overall expenses. That’s a lot of increases.
Much has been written lately about raise requests, shifting market pay levels, and sky-high job offers. No matter how your business has addressed these challenges, the result is more dollars spent on employee compensation.
The impact of these actions has pushed overall compensation expense higher than predicted levels. These compensation related expenses are typically increases to base pay and bonuses that were not anticipated and likely brought on by market pressures.
Higher compensation expense impacts net income, which is a key factor in determining patronage refunds for cooperatives.
Balanced Approach to Compensation and Patronage
Instead of having a tug-of-war between patronage payouts and employee compensation, consider the following ideas for a balanced approach.
- Stay true to your compensation philosophy. If your approach is to pay fairly and reward top performers with the highest compensation, now is not the time to change your approach. Maintaining your key players is more important now more than ever, so channel your dollars to the jobs and people where the impact is most effective.
- Short-term pain, long-term gain. Many managers are feeling the pain of additional compensation expenses this year. We hear you! However, know that you have options as to what form that compensation increase takes. For example, a $2,000 addition to salary is a permanent addition to pay, but a $2,000 bonus is a once-and-done payment that still gives the same value in the current year, without impacting base pay. The bonus still gets the dollars into the employee’s hands (even faster than a base salary increase!) without causing long-term misalignment.
- Maintain perspective. One of the phrases I often say is “this too shall pass” – and you know what? It usually does. So don’t get lost in the weeds or drown in the details. Rather, keep a high-level view of compensation and make decisions through that lens. Because most things are not guaranteed, and we know change will continue to occur.
Compensation Increase Decisions Directly Impact Patronage Payouts to Customers
- Putting too much into employee compensation can unintentionally impact the bottom line and customer engagement or patronage.
- Not paying enough will cause turnover and greater risk of customer dissatisfaction.
Finding the balance will maximize employee retention and engagement along with customer satisfaction and patronage. The approach to compensation, particularly right now, needs to be thoughtful to retain and reward both sides of the cooperative structure equation.