5 Signs of Bad Employee Compensation and Benefits Packages

By: Laura Mohammad
August 10th, 2011

Some signs of a bad employee compensation and benefits packages are pretty obvious. For example, if employees complain about unfair compensation or exiting workers tell you that the employee benefits (or lack of them) were a deciding factor for leaving, then you know you have a problem.

Other signs to be aware of include worker confusion regarding what is (or isn’t) covered in the employee benefits package as well as a consistent decline in employee morale. These can be signs that your employees are not fairly compensated for their work.

Here are five signs that your compensation and benefits aren’t up to snuff:

1. Trouble recruiting. If you’re interviewing plenty of candidates, but few are accepting your offer, then it’s time to look at possible reasons for the disconnect.

“Your numbers will give you a feel for where in the employment process your plan is weak or breaking down,” says Deborah Millhouse, president of North Carolina-based CEO Inc., which specializes in direct hire placement, temporary staffing and human capital services.

If you have the resources for a professional recruiter, he or she can advise you about where there are disparities in the compensation sphere. The recruiter can also identify where other employers stand on employee compensation and benefits packages and make recommendations on how to make adjustments to your compensation package.

2. Open discussions about employee compensation. Compensation comes up when workers aren’t happy, says Millhouse.

“The reasons for their dissatisfaction can range widely, including feeling that they aren’t paid enough, or they aren’t paid fairly compared with other employees, or there are errors in their paychecks, or any number of other reasons,” she says.

3. Questions about employee benefits. When employees have ongoing questions about benefits, or if they have issues whenever they try to use their benefits, it’s time to pinpoint the problems and fix them.

4. Motivation, morale and general drama. If you see a lack of motivation, low employee morale, or ongoing drama, it may be a sign that employee compensation is at issue. Be careful in approaching this one, though, since low employee morale and attitudes can be indicative of other issues, such as a dysfunctional culture or poor leadership.

“However, when employees don’t feel that they are being compensated commensurate with the value they bring to the organization, they are not motivated to expend a tremendous amount of effort on the behalf of that organization,” says Millhouse.

5. The exit interview. It can’t get any more obvious than this: If your exiting employees frequently mention unfair employee compensation or benefit packages as a reason for leaving, it’s time to identify and fix.

It’s important to regularly review your employee compensation and benefits packages to make sure you’re offering a fair compensation package and the best employee benefits package you can afford to your employees. After all, when you have happy employees who are compensated fairly, your company can achieve significantly higher levels of employee productivity, employee satisfaction and employee retention which, in turn, leads to higher levels of profitability.

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