Employee compensation programs have a lot of pitfalls for employers. How do you ensure the program is equitable, fair, and consistently-applied? What type of employee compensation program is best?

In a recent BLR webinar, Chuck Csizmar gave us an outline of how to create an effective employee compensation plan that addresses the issues of fairness, consistency, and effective communication. He explained that an organization’s compensation plan can not only attract top performers, it can also keep employees motivated. To be most effective, the plan must be well-aligned with both your organization’s overall culture and the rest of your business strategy.

At the end of his presentation, Csizmar lent his expertise to answer employee compensation questions from the webinar participants. Here are a couple of their questions and answers that may help you as well.

Q. How do you handle gender inequity in a compensation strategy?

A. First of all, you have to presume that the company would avoid having a strategy that implies (subtly or not) that there is any sort of a gender basis for any decisions made regarding employee rewards. If there is some sort of an adverse impact of your pay practices associated with how rewards are actually distributed today, clearly that is going to go against – or should go against – your stated strategy. That needs to be resolved. It’s difficult to get into depth on this question without knowing the particular pay practices in question.

The first thing you have to do when you identify there is an adverse impact of one of the pay practices is to stop. The hole is deep enough – throw away the shovel! Then you have to identify the adversely-impacted employees. Look at each individual situation and determine what has happened and how to fix it. In short: first ensure that the practices leading to the situation are stopped. Then create a strategy to treat each individual appropriately to correct the problem.

Q. How do you compare pay-for-performance to length-of-service programs? We have blended our length-of-service rewards with pay-for-performance.

A. "I’d be careful about length-of-service awards as compared to pay-for-performance. I would make a distinction." Csizmar noted. Length-of-service programs basically reward people for showing up for a long time. Pay-for-performance programs reward for what you have achieved (performed), regardless of how long you’ve been with the company. It is not defined by how long you’ve been there; it is defined by what you’ve achieved. As such, some companies actually purposefully eliminate length-of-service rewards when implementing pay-for-performance programs.

With the blended approach, also be careful with creating length-of-service rewards that could cause resentment in individuals who have performed just as well on the pay-for-performance side, but get less since they’ve been there a couple years less time.

That said, there’s nothing wrong with giving some type of recognition or even gift to show appreciation for length-of-service (i.e. a watch, a gift certificate), but avoid cash rewards. Use money to reward achievements and results.

For more information on creating effective employee compensation plans, order the webinar recording of "Creating Your Compensation Strategy Document: Get the Results – and Employees – You Want." To register for a future webinar, visit http://catalog.blr.com/audio.

Chuck Csizmar is a Global Compensation Consultant and the founder and principal of CMC Compensation Group, a professional services provider specializing in analytic, project management, and consultative services for US and international clients.