The basic rule of pay-for-performance? You can’t pay for performance unless you can measure performance on a consistent, credible basis, says consultant Paul R. Dorf, Ph.D., APD.

Workplace compensation is essentially a supply and demand system, says Dorf, who is managing director of Compensation Resources, Inc. Supply has been strong, and that has meant small or no raises, but that is starting to change.

Numerous studies say that about 60 percent or more of employees would look at another job as the economy improves. Plus, people who delayed retirement are now considering retiring—their 401ks have come back in value. Demographically, the Baby Boomers are starting to retire, and there aren’t sufficient workers coming along to replace them.

So there’s going to be a reversal of supply and demand, says Dorf. That means employers should:

• Anticipate increases in demand for skilled job applicants;
• Expect turnover of skilled staff; and
• Plan for increased cost of turnover (hard cost and soft cost).

You must develop programs that allow you to:

• Identify your star players and compensate; and
• Engage high performers to keep them on board.

You Need Professional Help

Most organizations have an accountant, an attorney, and an insurance agent, says Dorf, but many companies haven’t done much with getting professional assistance with compensation, and that’s going to be increasingly important.

All the wage/hour employee handbook policies you need—and dozens more, too. Specifically written for California employers! Click here for details.

"FARM"

Dorf uses the acronym FARM to outline the goals of compensation planning:

Focus employees on achieving key business objectives. For example, says Dorf, sales people like to work within their comfort zone—they want to sell products they are comfortable with, to customers they know, at the lowest price they can—but that isn’t necessarily what the company wants. The company may want to sell new products to new customers at higher prices. Compensation can help with that focus.

Attract qualified and quality employees. We have seen companies that were so poorly organized that they were truly bottom feeding with no idea of what they needed, says Dorf.

Retain staff who contribute positively to overall company performance.

Motivate and engage staff to achieve higher levels of performance.

Everyone wants to be “competitive,” but few define what that word means, says Dorf. You need a formal statement of your company's position on compensation that:

• Identifies elements of pay, market positioning, emphasis on fixed/variable pay, etc.;
• Indicates the company's position on pay for performance;
• Serves as baseline for market assessment, plan design, and redesign; and
• Circles back to basic compensation objectives.

Defining Position on Pay for Performance

Here are the important questions when assessing your pay for performance, says Dorf:

• Can your company measure performance?
• Can you effectively track performance?
• Can you tie compensation and employee actions to performance?
• Do employees recognize the link between results and pay?
• Are employees motivated to achieve higher levels of performance?

Is Measuring Performance Once a Year Enough?

Think about this, says Dorf: You’re in charge of sales, and each of your salespeople has a bogie or target of $12 million in sales for 2012. Are you going to wait until December 31 to look at their performance?

Of course not, says Dorf. You’re going to be looking on a much more frequent basis—probably at least monthly. Are the sales you need for the month closed? Are the sales you need for next month in the pipeline? Are you at the goal of $1 million a month?

And it’s really the same for any job, Dorf says—performance evaluations need to be done more frequently than once a year.

Performance Management Challenges

Some of the issues managers face in trying to implement pay for performance:

• Managers are not properly trained in doing performance management. You need to do consistent training, at least annually, or maybe role playing twice a year, says Dorf. In two major studies his firm did of government employees, 90 percent were at the top of the performance scale.
• Entitlement mentality reduces the effectiveness of performance management.
• Inconsistent usage by managers tends to disengage employees and invalidate the system
• Managers are unable or unwilling to identify the truly outstanding performers.
• Limited budgets make it a challenge to differentiate pay based on performance.

California-Specific Wage/Hour Policies and So Much More

Handling compensation and wage/hour challenges … it’s a big part of your responsibilities as an HR professional but far from the only thing you need to worry about.

In HR, if it’s not one thing, it’s another. Like employee leaves, harassment complaints, social media concerns—and then on top of that, whatever the agencies and courts throw in your way. And you need the right handbook policies for all of them.

Fortunately, we’ve got you covered.

Our fully updated HR Management & Compliance Report, the California Employee Handbook Template includes 101 vital policies—written specifically for employers in California—including:

• At-Will Employment
• Employee Classifications
• Social Media Code of Conduct
• Right to Observe Employees
• Voice Mail, E-mail, Electronic and Computer Files, and Usage
• Appearance and Courtesy; Uniforms
• Equal Employment Opportunity
• Harassment Prohibited
• Retaliation Prohibited
• Bullying Prohibited
• Accommodation of Disabilities
• Zero Tolerance for Drugs or Alcohol in the Workplace
• Terminations
• Final Pay
• Progressive Discipline
• Rest Periods
• Meal Periods—fully updated following the California Supreme Court’s decision in Brinker!
• Overtime Pay, Authorization, and Mandatory Overtime
• Payroll Deductions
• Travel Time Pay
• Bereavement Leave
• COBRA Coverage for Health Insurance
• And 79 more!

Click here for a full Table of Contents.

All of the policies are fully editable and customizable—when you order, you’ll get a link to editable Word versions of all 101 policies.

All of the policies in the California Employee Handbook Template have been drafted by an experienced California employment lawyer. Plus, we’ve provided practical information for every single policy on:

• Which employers the policy applies to
• Which employees the policy applies to
• Whether the policy is required or optional
• Special considerations

It’s like having a California employment lawyer on call, working on your handbook 24/7, at a fraction of the cost!
Best of all, we’ll send you a brand-new edition each year so you always have the most up-to-date policies available. Don’t delay—order today and get all your handbook questions answered once and for all. Learn more here.

Download your free copy of 20 Must-Have Employee Handbook Policies today!