What is a Compensation and Benefits Program?

A compensation and benefits philosophy & program is a set of policies and practices to compensate employees for their work. The program usually includes a combination of salary, bonuses, benefits, and other incentives.

Why is Compensation and Benefits Important?

A well-designed compensation and benefits program can serve as a powerful tool for attracting, motivating, and retaining talented employees. When aligned with organizational values, it reflects the organization’s commitment to its employees, and positive societal influence.

Benefits of a Compensation and Benefits Program

A well-designed compensation and benefits program can have the following benefits:

• Supporting the organization’s mission, vision, and values: Effective compensation and benefits programs can reinforce an organization’s mission, vision, and values, along with promoting positive societal impact by prioritizing equity. These programs can also help attract and retain employees who share the organization’s commitment to social impact and equity.
• Supporting overall employee well-being: Compensation and benefits programs are how most employees support and care for themselves and their families, as well as contribute to their communities. Benefits can also include things like mental health resources, wellness programs, and flexible work arrangements that support overall employee well-being.
• Attracting talent: An appealing compensation and benefits package can help draw in highly skilled individuals who are seeking competitive and rewarding opportunities. It enhances the organization’s reputation as an employer of choice and increases its chances of attracting top performers.
• Retaining employees: A comprehensive program that includes fair and competitive compensation, as well as desirable benefits, can enhance employee satisfaction and reduce turnover. It demonstrates the organization’s commitment to valuing and investing in its workforce, promoting loyalty and long-term engagement.
• Reinforcing organizational culture: A well-designed compensation and benefits program can reflect the organization’s values and culture. It serves as a tangible expression of the organization’s commitment to its employees’ well-being, fostering a positive and supportive work environment.
• Enhancing employee morale and engagement: A comprehensive program that includes benefits like health insurance, retirement plans, and work-life balance initiatives can contribute to improved employee morale and overall satisfaction.

Why is this Topic Different for Employment Social Enterprises?

Social enterprises have unique considerations when it comes to compensation and benefits. Many employees in social enterprises face barriers to employment and may require additional support and resources to succeed. Additionally, social enterprises may prioritize certain values and principles in their compensation and benefits program that align with their mission, such as providing competitive wages and benefits to support workers’ financial stability.

If you’re interested in learning more about benefits specifically for participant workers, check out out this overview document in the Employee Success Program section – 

• Employee success wraparound services

Best Practices

Here are some best practices for developing a compensation and benefits program for social enterprises:

• Establish a compensation philosophy: Develop a compensation philosophy that is aligned with the organization’s mission and values. For example, an organization focused on women’s rights may prioritize providing competitive wages and benefits in its compensation program.
• Conduct a market analysis: Conduct a market analysis to determine the compensation and benefits packages offered by similar organizations in the industry. This will help to ensure that the organization’s compensation packages are competitive and attractive to potential employees.
• Prioritize equity: Ensure that the compensation and benefits program is equitable and fair for all employees. This includes providing equal pay for equal work, regardless of gender, race, or other characteristics.
• Consider internal and external equity: Consider both internal equity (the fairness of pay within the organization) and external equity (the fairness of pay compared to similar organizations in the industry) when designing compensation packages.
• Establish pay ranges: Establish pay ranges for each position based on market data and internal equity considerations.
• Provide comprehensive benefits: Offer a comprehensive benefits package that includes healthcare, retirement benefits, paid time off, and other benefits that are important to employees.
• Include additional incentives: Consider offering additional incentives, such as performance-based bonuses or profit-sharing, to motivate and engage employees.

Foundational Concepts

Effective compensation and benefits programs are founded on several key concepts, including:

• Compensation philosophy: A compensation philosophy is a set of principles that guide an organization’s approach to compensation. It should be aligned with the organization’s mission and values.
• Total rewards: Total rewards refer to the comprehensive set of benefits and incentives offered by an organization to attract, retain, and motivate employees. This includes not just salary and traditional benefits, but also non-monetary rewards such as recognition programs, work-life balance initiatives, and opportunities for career advancement. 
• Internal equity: Internal equity refers to the fairness of pay within the organization. It ensures that employees are paid fairly for their work and that there are no significant pay disparities within the organization.
• External equity: External equity refers to the fairness of pay compared to similar organizations in the industry. It ensures that the organization’s compensation packages are competitive and attractive to potential employees.
• Pay ranges: Pay ranges are the minimum and maximum amount of pay that an organization provides for a given position. They are typically based on market data and internal equity considerations.
• Benefits: Benefits are non-wage compensation such as healthcare, retirement benefits, paid time off, and other benefits that support employee well-being

Establishing a Compensation and Benefits Program

Here are some best practices for developing a compensation and benefits program for social enterprises:

1. Establish salary and compensation approach and structure

• Develop a compensation philosophy that is aligned with the organization’s mission and values.
  
  Example Compensation Philosophy: We recognize that compensation is an essential part of the employment experience and that financial stability and well-being go hand-in-hand. We prioritize providing a living wage that reflects the value of our employees and their contributions to our organization.
  
  We regularly review and update our compensation program to ensure that it remains competitive in the market and aligned with our values, resources, and the needs of our employees.
  
  In addition to providing competitive wages, we offer a comprehensive benefits package that includes healthcare, retirement benefits, paid time off, and other benefits that are important to our employees. We also annually review our benefits and consider offering additional benefits that align with our mission and values, such as flexible work arrangements or professional development opportunities.
  
  We prioritize internal and external compensation equity, ensuring that our compensation packages are consistent with the experience, skills, and performance of our employees. We believe in providing opportunities for growth and development for all employees, and we regularly provide coaching and support to help our employees achieve their goals.
  
• Determine how to establish appropriate and equitable compensation structures and methods by considering factors such as market data, organizational hierarchy, years of experience, geography, and other relevant factors.
  • For example, the organization may decide to use market data to determine competitive salaries, while also taking into account internal pay equity and individual employee capabilities and performance.
  • Another approach could be to establish pay grades based on job responsibilities, education, and experience levels, and adjust salaries within those grades based on performance and other relevant factors.
    
• Conduct a market analysis to determine the compensation and benefits packages offered by similar organizations in the industry.
  
• Ensure that the compensation and benefits program is equitable for all employees. This includes providing equal pay for equal work, regardless of gender, race, or other identity characteristics.
  
• Consider both internal equity (the fairness of pay within the organization) and external equity (the fairness of pay compared to similar organizations in the industry) when designing compensation packages.
  
• Establish pay ranges for each position based on market data and internal equity considerations.
  
• Consider offering additional incentives, such as performance-based bonuses or profit-sharing, to motivate and engage employees.

2. Establish benefits offerings and programming

• Offer a comprehensive benefits package that includes healthcare, retirement benefits, paid time off, and other benefits that are important to employees.
• Consider offering additional benefits that align with the organization’s mission and values, such as flexible work arrangements or professional development opportunities.

3. Manage compensation and benefits in an equitable way

• Regularly review, audit, and update the compensation and benefits program to ensure that it remains competitive and equitable, and maintains alignment with the organization’s culture and values.
  • Consider auditing and analyzing salary and benefits every one to two years, but not more than three years, is a good place to start considering the cadence of your compensation reviews.
• Ensure that all employees have equitable access to the resources and support they need to succeed, regardless of their background, identity or experience.
  • For example, proactively consider healthcare and well-being needs of LGBTQIA+ individuals; and especially transgender employees, women, caregivers, and employees with disabilities and chronic illnesses, and lower income employees.
• Monitor and address any disparities in pay or benefits that may arise.

Success Metrics

Some key success metrics for a compensation and benefits program are:

• Employee Retention Rates: The percentage of employees who remain with the organization over a specified period of time. High retention rates suggest that employees feel valued and supported by the organization, while low retention rates may indicate that the organization needs to improve its compensation and benefits offerings or address other issues that may be affecting employee satisfaction.
• Employee Satisfaction Levels: Employees’ overall level of happiness and engagement with their work and the organization. This can be measured through surveys or other feedback mechanisms that allow employees to share their thoughts and feelings about their compensation and benefits packages.
• Cost of Employee Turnover: The direct and indirect costs associated with replacing an employee who leaves the organization. These costs can include recruitment and hiring expenses, lost productivity, and other expenses associated with onboarding and training new employees. By tracking the cost of employee turnover, social enterprises can assess the financial impact of their compensation and benefits program and identify areas for improvement.
• Compensation and Benefits Expense as a Percentage of Total Operating Expenses: The proportion of the organization’s resources that are allocated to employee compensation and benefits. This metric can help social enterprises assess whether they are investing an appropriate amount in their employees relative to other organizational priorities.
  • There is no one-size-fits-all appropriate percentage of compensation and benefits expenses; they will vary depending on the organization’s size, industry, and other factors. However, a common range for compensation and benefits expenses as a percentage of total operating expenses is between 30% and 50%.

Additional Resources

Here are some additional resources for developing a compensation and benefits program for social enterprises:

• Best Nonprofit Hiring Strategies: Compensation Packages 101 is a blog post that provides an overview of compensation packages for nonprofit organizations and offers tips for creating compensation packages.

About S P A C E

S P A C E is a consulting firm that transforms the employee experience by creating a safe and positive work environment for all, particularly those who are most vulnerable to workplace adversity. They offer a range of services, including human-centered HR strategy and advisory, organizational development, and personal and professional development coaching and support.