Pay structures and models placated upon the performance-based model

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Employee compensation includes both direct financial payments and indirect financial statements. Many different factors contribute to employee satisfaction besides compensation; enjoyable, interesting, challenging work; a positive work environment and a positive work environment and competitive benefits. If the economy is making you rethink your compensation and benefit packages, consider some alternatives to maintain your team's morale. For example, in lieu of a cost of living increase, try offering additional paid or unpaid vacation days to your employees (Messmer, 2013).

Set clear rules. Whether you're dealing with an incentive system or a merit-raise program, everyone must understand the rules that govern the rewards program. Key information includes who's eligible for the program, what they must do to receive the reward, who decides on those who benefit, and the size of the reward.

Set specific targets or goals you can quantify. If you're going to establish incentives, make sure that you set a specific target: "125 percent of our annual sales quota," for example, or "more than 500 pieces per day." Specific numbers eliminate arguments and misunderstandings.

Make the goal worthwhile. If the incentives aren't attractive, they're not really incentives. So, gear the reward to the group whose performance you're seeking to enhance. Think about setting up different rewards for varying levels of achievement.

Don't ask for the impossible. Such terms as killer goals may sound highly motivational, but you may only discourage employees if they think they're simply unattainable. Not only can that dampen their motivation and effort, but it also costs you credibility. That's not to say there's anything wrong with "stretch" goals, but they should be attainable.

Don't make promises you can't keep. Never promise a bonus or incentive you're not sure you can afford.

No one is saying that you have to pay top dollar for talent. Lasting workforce with low turnover is your goal, you do need to pay enough for your employees to feel that working for you is worth it, to keep them from actively seeking a better deal across the street. This does not necessarily mean a high base salary. In fact, it is more effective to base pay on accomplishment with a number of soft benefits to keep up morale and address work-life issues thrown in for good measure. According to Human Resources consultant and author Susan M. Heathfield, your compensation plan should take into account the following elements:

Organizations need to develop a written compensation philosophy and direction, which should be reviewed by the Board of Directors and agreed by your managers.

Particularly in an entrepreneurial, market-driven company, the compensation philosophy needs to include a method for grouping similar jobs for purpose of broad banding, since promotional opportunities are limited.

It should include a responsible, measurement system for awarding variable pay, with less emphasis on increasing base pay, and more emphasis on increasing base pay, and more emphasis on distributing gains via bonuses that reward actual goal attainment.

Goal attainment should be rewarded for both individual and organizational goal achievement to foster teamwork and eliminate the "lone ranger" mentally.

Real goal achievement is attached to outcomes or deliverables that are measureable or offer a shared picture of what success looks like. They should not reward checking items off a "to-do" list.

As the cost of benefits has increased, their place in a total compensation package has increased in importance. Shifting the costs of some benefits to employees is a last-option scenario.

More employers are moving from paying jobs based on their intrinsic duties toward paying jobs based on the competencies the job requires. The main reason for doing so is to encourage employees to develop the competencies they need to move seamlessly from job to job (Dessler, 2013).