Break-down of Company Salary and Rewards Structure.


In this article I will be sharing some a break-down of all you need to know about company salary and rewards structure.

The diversity of today’s workforce requires employers to be highly flexible and innovative with the compensation and benefits they provide.

The rewards an employee gets from the job itself are intrinsic rewards, but managers have at their disposal, a wide variety of extrinsic salary and rewards structure (those outside the job itself) to attract, retain and motivate workers.

Establishing a robust salary and rewards structure is an important aspect of creating a culture that attracts and retains quality workers. The keys to using rewards to motivate are linking them to performances and tailoring them to the needs and characteristics of the workers. Entrepreneurs must base rewards and compensation on what is really important to their employees. One of the most popular salary and rewards structure is that that provide more cash benefits. Cash is an effective motivator up to a point. Simple performance bonuses, perks and cash benefits are a common salary and rewards structure at many companies. The closer the bonus payment is to the action that prompted it, the more effective it will be.

Other companies have moved to pay-for-performance compensation system, in which employees’ pay depends on how well they perform their jobs. In other words, extra productivity equals extra pay. By linking employees compensation directly to the company’s financial performance, a business owner increases the likelihood that workers will achieve performance targets that are in their best interest and in the company’s best interest.

salary and rewards structure

Pay-for-performance salary and rewards structure works only when employees see a clear connection between their performance and their pay. This is where small businesses have an advantage over large businesses because employees who work for small companies can see more clearly, the impact their performances have on the company’s profitability and ultimate success, than their counterparts in large corporations.

Some companies offer their employees, salary and rewards structure in the form of profit-sharing plans in which employees receive a portion of the company’s profits. This form of reward and compensation is a bit dicey; in the sense that, it does not help you with budgeting and forecasting as you don’t have an idea of the total profit that the company will make each year, how much you’ll be receiving and other major concerns.

A few companies have gone even farther, coupling profit-sharing plans with open-book management, a system in which entrepreneurs share openly, their company’s financial results with employees. The goal is to teach employees how their job performance has a direct impact on profits and to give them an incentive for improving the company’s bottom line.

According to Jack Stack, open-book management gives everyone the chance to see what they need to do to succeed.

Money isn’t the only motivator business owners have at their disposal, of course. In fact, money tends to be only a short-term motivator. In addition to the financial compensation they provide, most companies offer their employees a wide array of benefits.

In an economy in which they must compete aggressively for employees, entrepreneurs must recognize that compensation and benefits no longer follow a “one-size-fits-all” pattern. The diversity of today’s workforce requires employers to be highly flexible and innovative with the compensation and benefits they provide.

To attract and retain workers, creative entrepreneurs offer employees benefits designed to appeal to the particular needs of the employees. This diversity has led to the popularity of cafeteria benefit plans, in which employers provide certain base benefits and then allocate a specific dollar amount for employees to select the benefit that suits their needs best.

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Beyond flexible salary and rewards structure, many small companies are setting themselves apart from others by offering unique benefits. Besides the wages, salaries and attractive benefits they use as motivators, creative entrepreneurs have discovered that intangible incentives can be more important sources of employee motivation. After an initial boost, money loses its impact as a motivator; it does not have a lasting motivational effect (which for small businesses, with their limited resources, is a plus). For many workers, the most meaningful motivational factors are the simplest ones – praise, recognition, feedback, job security, promotions and others – things that any small business, no matter how limited its budget, can do.


When the economy is in a downturn, a business that can display its commitment to employees through a record of job security has a powerful tool to recruit good employees. Because they lack the financial resources of bigger companies, small business owners must be more creative when it comes to giving rewards that motivate workers. In many cases, however, using rewards other than money gives small businesses an advantage because they usually have more impact on employee performance over time. Rewards do not have to be expensive to be effective, and managers are not the only ones who can give them.

Praise is another simple yet powerful motivational tool. People enjoy getting praises, especially from a manager or business owner; it’s just human nature. Praise is an easy and inexpressive reward for employees producing extraordinary work. A short note to an employee for a job well done costs practically nothing, yet it can be a potent source of motivation.

The owner of one company who wrote short notes of appreciation on Post-Its to each of his employees was amazed at how much his simple gesture meant to them. How often have you had an employer say “thank you” for a job you performed well?

Ultimately, a company’s salary and rewards structure will go a long way to boost employee productively and overall company growth.

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