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Implementing a formal onboarding process is a key part of enhancing employee retention and productivity. Onboarding can help new hires adjust to their jobs more quickly, acquire many of the skills and the knowledge needed to contribute to the organization, and get up to speed on the social and performance elements of their new positions. Read on to learn more about the importance of onboarding and what it takes to implement a solid employee onboarding process at your business.

The First Six Months: Establishing a Formal Employee Onboarding Process

The first six months can be critical for a new employee as they form impressions that can impact retention and performance. Establishing a clear, formal onboarding process can set each new employee up for success by helping them navigate the company environment and understand what it takes to succeed in their new position. A formal onboarding and orientation process may include written materials, orientation courses and presentations from HR and managers, meetings with internal stakeholders, shadowing and training, and ongoing mentorship.

Why Is Onboarding Important?

In a competitive hiring landscape, it's important to take steps to make a great first impression and focus on how the business welcomes new hires. From the time an offer is extended until the day the new hire becomes fully productive, the employee onboarding experience can lay the foundation for long-term success.

Here's a closer look at some reasons why having a formal employee onboarding process is important.

Helps Communicate Cultural Norms

Each business has its own organizational culture. The earlier an employee understands what is expected of them and what it takes to succeed within the organization, the more likely they are to become a productive and satisfied employee. Communicating cultural norms can include sharing written, formal policies, and explaining why they are important and how they're enforced. It may also involve explaining the organizational structure, outlining internal processes and communications protocols, and ensuring that the employee understands what steps they can take to approach specific challenges. Finally, successful onboarding also requires communicating the intangible factors of the work environment.

Shortens the Time to Productivity

Conventional wisdom suggests that it takes weeks or months for an employee to get up to speed in a new position. But thorough onboarding programs can drastically reduce the time to productivity. One of the most important aspects of this is communicating the responsibilities of the position, the expectations and metrics for success, the reporting lines, and processes associated with the position. One-on-one time with the employee's manager to answer questions can help the employee understand their role as part of the big picture, and providing necessary training can also help increase productivity earlier in employment. Spending time explaining team dynamics, team processes, and norms of communication is another way to underscore employee success.

Fulfills Brand Promise and Differentiation

Your onboarding process should help give employees the tools and knowledge needed to represent the business. Best practices would include communicating these values and unique selling points. Provide clear examples of how each position would represent these values as part of their role, from a vice president of sales interacting with key clients to an assistant representing the brand on the phone. Finally, site visits or themed presentations that show successful examples of company branding can reinforce these points.

Supports Training, Development, and Performance

As your company develops an onboarding program, it should include both standardized components and specialized adaptations for individual employees and positions. Your onboarding process should have the flexibility to provide specialized training to help each employee succeed in their specific position. In addition, consider building in support that provides a development plan incorporating mentorship, future training opportunities, and growth assignments. Managers, mentors, and HR staff can then support employees as they grow.

Reduces New Employee Turnover

With quit rates reaching record levels, many businesses continue to struggle to provide a positive employee experience. The Bureau of Labor Statistics (BLS) revealed that the nationwide quit rate was 2.6 percent or about 4 million individuals in February 2023, one of the highest rates since 2000 when BLS first collected this data. And according to the Society for Human Resource Management (SHRM), employee turnover can be as much as 50 percent in the first four months of employment.

These statistics support the idea that the risk of employee turnover can be present even during a new hire's first days and months. Many HR leaders understand this and have identified the importance of having a new-hire onboarding process. According to the 2022 Paychex Pulse of HR Survey, 35 percent of HR leaders said focusing on the onboarding process to help new hires feel engaged and be productive as soon as possible works best when it comes to fostering overall employee engagement.

Acclimates New Hires

Part of a successful onboarding process includes providing new hires with information about your industry, business history, and big-picture strategy. They should also become acclimated to your culture, values, and the people they'll be working with. As part of this introduction process, allow employees to reflect on their own background, values and strengths, and career aspirations. Then empower them to contribute to their role and place in the company, identify potential growth opportunities, and provide them with the resources and information they need to be successful.

Encourages Employee Engagement

Taking a concerted approach to acclimating new hires also aids in employee engagement. Consider establishing onboarding programs that account for factors such as the unique ways each new hire may like to learn. Successful onboarding programs embrace a variety of learning methods and resources (video, interactive elements, webinars, apps, animation, etc.) that promote greater interest and engagement. Shadowing team members or establishing mentoring programs can also offer real-life information that you can't capture in new-hire materials. When new employees can take what they've learned and apply it to the actual workspace, it increases their sense of comfort and builds confidence in their ability to contribute to a new work environment.

Assists With Recruiting

A positive onboarding experience can increase word of mouth to future candidates and boost an employer’s reputation as a great place to work. During onboarding, allocate time for new hires to begin forming a solid relationship with their manager, create opportunities for new hires to meet colleagues from around the business, and build on the interactions they had during the recruiting process.

Begin or Improve Your Employee Onboarding Process Today

When you take the time to recruit and hire high-quality talent, it's important that you also acclimate them to their jobs and the business in engaging and effective ways. Learn more about how you can streamline the onboarding process to help new hires get up and running more efficiently with Paychex.

If you hire employees, you want their employment to be a positive experience. However, an applicant, or current or former employee may take legal action against your company that could put the company at risk. To help mitigate your exposure from costly claims, employment practices liability insurance can offer some protection. Learn more about EPL insurance, how it compares to other common types of business insurance policies, costs associated with such a policy, and how EPLI can help protect your business.

What Is EPLI?

Employment practices liability insurance, commonly referred to as EPLI or EPL insurance, is a type of business insurance policy that helps cover company losses associated with certain employment claims alleging violations of the rights of an employee or applicant for employment. If a job applicant, or current or former employee takes legal action against your business, EPLI may help cover defense costs and damages, regardless of the outcome of the action. Learn more about what may be covered under EPLI policies.

EPLI may be purchased as a standalone business policy. It's also common to bundle this coverage as part of a business owner's policy or general liability policy.

What Is the Difference Between EPLI and Workers' Compensation Insurance?

EPLI and workers' compensation insurance are separate types of coverage. EPLI helps protect the company against certain employment-related claims including wrongful employment practices. Although there is no legal requirement to carry this coverage, it may be a good business decision for any company hiring employees. Workers' compensation insurance policies, on the other hand, cover medical expenses and lost wages for employees who experience a work-related injury or illness. Workers' compensation insurance is mandatory for most employers in most states.

Is EPLI the Same As Errors and Omissions Coverage?

No, EPLI and Errors and Omissions (E&O) insurance are distinct coverages. Generally, EPLI provides protection from certain employment-related claims, while E&O covers liabilities stemming from customer or client claims. For example, errors and omissions would help cover court costs and settlements if a customer were to file a lawsuit alleging negligent actions in your professional services. A common claim errors and omissions might cover is a suit for breach of contract. E&O policies often cover the business owner and employees.

What Is the Difference Between EPLI and Directors and Officers (D&O) coverage?

D&O coverage is a form of professional liability insurance that protects the personal assets of company executives, officers, and board members in the event they are sued for alleged wrongful acts in managing a company. It can provide coverage for employment issues (but only for covered individuals, i.e., directors and officers) and can also cover things like breaches of fiduciary duty. Additionally, any business with a board of directors, including small companies, can have a D&O insurance policy. While EPLI can also be beneficial for businesses of any size, the policy’s aim is to protect the company from allegations from applicants and current or former employees. Whereas D&O insurance provides liability protection for claims brought by people outside of a company, such as dissatisfied clients or investors.

EPLI Claims Examples

Employment-related claims can result in significant negative impacts to a business's bottom line, reputation, and productivity. Common EPLI claims may include:

• Wrongful termination: While many employees are employed at-will (meaning that the employee or employer can terminate the employment relationship for any reason or no reason at any time except where prohibited by state law or public policy), employees may claim that they were wrongfully terminated.
• Charges of workplace harassment: An alleged harasser can be the victim's supervisor, a supervisor in another area, a co-worker, a subcontractor, or someone outside the company, such as a delivery person or vendor. Harassment victims may include any individuals affected by the offensive conduct, not just the person targeted by the harasser.

Who Needs Employment Practices Liability Insurance Coverage?

With the number of employment-related claims filed with the EEOC, given the steep costs associated with employment related claims, nearly any business with a workforce can benefit from EPLI coverage and mitigate their financial exposure. While no industry is immune from employment-related risk, a few examples of industries that could particularly benefit from EPLI coverage include:

• Retail, an industry known for high turnover rates, may be susceptible to claims alleging age discrimination, harassment, or wrongful termination.
• Hospitality, which could experience claims of harassment.
• Professional services, in which businesses may have to handle claims around issues such as harassment, gender and age discrimination, failure to promote, and wrongful termination.
• Manufacturing and construction, where ebbs and flows in the amount of work a business has can lead to layoffs which increases the chances that employees will claim they were wrongfully terminated.
• Healthcare, where employees may allege experiencing harassment.

How Much Does EPLI Cost?

The cost of EPLI insurance policies will vary, and depend on your industry, employee count, the jurisdiction where you operate, whether your business has any history of similar employment-related litigation, and if you have established and consistently enforced employment policies, often documented in an employee handbook, in place. Often, an EPLI policy covers legal defense fees and settlement costs or damages (up to your policy's limit), whether you win, settle, or lose a case.

EPL Insurance Can Help Protect Your Business

Employment practice claims have become one of the fastest-growing sources of litigation. Make sure your business is prepared to mitigate the cost of these claims with protection through employment practices liability insurance. You may also want to learn more about how you can manage overall risk with our comprehensive guide on business insurance basics.

A compensation plan includes a company’s set of guidelines for delivering employees’ base pay, bonuses, and equity. A well-designed plan may also provide strategy for future company goals around employee compensation.

Having a compensation plan is a major component of your business. An employee's compensation and benefit options may significantly affect the quality of your workforce and your company's ability to attract and retain talent. A comprehensive compensation plan not only sets the value of what you’re paying, but also defines roles, levels, and outlines how performance will be evaluated.

Your business compensation costs, however, are more than simply an expense.

A compensation plan can play an important role in an organization’s overall budgeting and planning process. It can assist an organization in setting their budgets for employment-related expenses. Employers may also use a compensation plan to document benefits for employees to qualify for federal or state tax incentives. A documented compensation plan can establish guidelines and assist in complying with state and local pay transparency laws.

Compensation plans should comply with applicable state, federal, and local laws while striving to achieve internal fairness among similarly situated employees. It is important to note that where a state or local law provides a higher protection or benefit to the employee than exists under federal law, employers usually must comply with the more generous state or local statute. It’s always a great idea to have the compensation plan reviewed by an HR professional or outside counsel to help ensure competitiveness and compliance.

The Importance of a Compensation Strategy and Its Benefits

Generally, a compensation strategy includes the goal of attracting, motivating, and retaining top talent for the organization.

A compensation strategy should align with the company's values and objectives along with an explanation of how the plan will be implemented. The strategy should support the company's overall mission, vision, corporate culture, and strategy.

In developing a compensation strategy, the organization should determine whether they will set compensation at, above, or below market values and the degree to which employee benefits should complement the compensation package.

A company should also be aware of external factors (comparison of your pay practices within an industry), pay transparency laws, and internal factors (how you pay your existing employees versus each other and as compared to new employees).

Having a comprehensive and documented compensation strategy helps when an organization is looking to hire and retain talent. With a solid strategy in place, an employer can:

• Set pay ranges that can be used to assist in planning and budgeting
• Show employees how their compensation is tied to company values and the strategic plan for success
• Guide compensation decisions for newly created positions within the company
• Implement a methodology that helps to ensure that employees with similar knowledge, experience, and job duties are paid in a fair and consistent manner

When based on a solid strategy, a compensation plan can provide the following benefits to employers:

• Helps the company attract and retain talent
• Improves job engagement and job satisfaction for existing employees
• Sets parameters around compensation spending and provides a resource employers can use to evaluate their compensation practices against the industry standards
• Assists with compliance with pay transparency laws

What Is an Employee Total Compensation Package?

An employee's total compensation summary can be described as an employee’s direct compensation plus the benefits and incentives your organization offers. An employee total compensation package stretches beyond an employee’s rate of pay and often includes things such as benefits, bonuses, stock options, and non-monetary perks.

What's Included in a Total Employee Compensation Package?

When negotiating compensation with an employee or prospective employee, they may ask for certain items, such as a retirement savings plan, or a performance-based bonus, depending on what is most important to them.

A Total Employee Compensation Package will generally detail how the employer intends to pay the employee for their services (e.g., per-hour, weekly salary, etc.). If the employee is eligible for commissions or bonus programs, they should also be included. In addition to direct payments, compensation packages may outline indirect pay such as benefits plan options available and non-financial perks.

Additionally, the employer may opt to include a statement of other, nonfinancial items associated with employment, such as an in-house fitness center, career development programs, or employee recognition awards.

To attract top talent, Total Employee Compensation Packages should align with industry benchmarks and the relevant job market. Employers should audit their benefits packages regularly to ensure the total compensation they're offering is cost-effective and a good fit for employees.

Types of Compensation

A compensation plan typically identifies the different types of compensation offered to employees. There are two categories of compensation: Direct Compensation and Indirect Compensation.

Direct Compensation

Direct compensation is the monetary amount given directly to an employee. This amount is typically based on an annual salary amount, hourly rate, piece rate or a commission percentage and is included in the paycheck. Monetary bonuses and other financial incentives are also included in direct compensation.

Indirect Compensation

On the other hand, indirect compensation is the non-monetary amount given to an employee. For example, benefit programs, profit sharing plans, or other incentives that are not paid directly to the employee. Paid time off, the employer's contributions to benefit plans, and other benefits such as student loan assistance are considered indirect forms of compensation as well.

Indirect compensation may also include non-monetary perks with values that are more difficult to measure. Flex time or remote work arrangements, career development programs such as in-house mentorship, and employee recognition awards are examples of non-financial compensation that can provide value to employees.

Incorporating the Different Types of Compensation Into an Overall Plan

Within an overall compensation plan, different types of compensation are used to attract and retain employees. These types of compensation may be non-financial, benefits or direct monetary payments.

Direct compensation can be calculated using an employee's base pay, variable pay, or a combination of both.

Base pay is typically paid to an employee for performing specific job responsibilities. It can be paid as a salary or hourly amount.

When building a compensation plan, each position and its associated responsibilities should be reviewed to determine the appropriate base pay for the position.

In addition to base pay, employers may choose to offer variable-based monetary compensation in the form of bonuses for example. Variable pay can be used to incentivize employees toward achievements that help the company meet or exceed its overall strategic goals. Variable-based pay may include things like performance-based bonuses, profit sharing programs, employee recognition bonuses or safety bonuses.

Employee Compensation Plan FAQs

What Are the Top Employer Costs Related to Employee Compensation?

Employer costs for compensation may include the following items:

• Base Pay
• Overtime
• Payroll taxes
• Employer's share of benefit plan costs
• Bonuses
• Wellness programs
• Tuition reimbursement
• Student loan assistance
• Expenses related to the use of a company car
• Employee stock purchase or stock option plans

What Is Total Compensation?

Current and prospective employees often make career decisions based on the concept of total compensation. Some prospective hires may be willing to trade a lower salary for a richer benefit plan or more flexible work hours. Presenting employees with their total compensation from all sources, not just their base pay, can help the organization increase their ability to attract top talent and will better assist prospective employees with weighing career decisions.

How Do You Structure a Total Employee Compensation Package?

Employers can create a standard template listing all elements of compensation and fill in the line items as they apply to each individual employee. The compensation package template can be used to create offer letters and annual compensation reports for employees. Total Employee Compensation Packages may include the following items:

• Base pay, such as an hourly rate, weekly salary, or annual salary
• Variable pay, such as bonus or commission
• Value of benefits offered to employee
• Additional rewards such as flex-time options that can be described in non-monetary terms, or quantified, if possible

How Do You Calculate the Cost of a Total Employee Compensation Package?

On an annual basis, total employee compensation can be calculated based on the direct and indirect payments made throughout the year. The payments should include any compensation given to the employee in connection with fulfilling their job duties.

What Are Total Compensation and Total Reward Statements?

To increase employee understanding of how they are being paid and the cost of benefits being offered by the organization, employers may consider providing a total compensation or total rewards statement to employees. Both statements explain to employees how they are compensated or incentivized for their work.

Total compensation statements typically cover the amounts included in a compensation package: pay, bonus, commissions, and employee benefits.

In comparison, a total reward statement generally includes the components of a total compensation statement plus additional items. Job perks that are more difficult to measure on a cost basis but still make an impact on employees may be found on a total rewards statement. This may include (but is not limited to):

• Service or recognition awards
• Career development services available to employees
• Vacation and Leave benefits
• Retirement benefits such as pensions and/or 401(k) matches
• Health Care Benefits
• Child or Elder Care
• Legal Assistance
• Tuition Reimbursements

Ultimately, it's up to the employer to decide which statement option works best and when they should be distributed. A system such as Paychex Flex^® Analytics and Reports Center can be used to generate a Compensation Summary Report at any time during the year. This type of report provides employees with access to their total compensation, including monetary earnings, bonuses, and medical and retirement benefits, providing an increased level of transparency.

Stay Competitive With a Well-Developed Compensation Plan

Solid data and analytics are the building blocks of a fair, competitive compensation plan. In addition to broader compensation studies and benchmarking reports, in-house data gathered in systems such as Paychex Flex Analytics and Reports Center can provide information needed to help create a competitive compensation plan.

If you're creating or revising your company's compensation policies, the HR professionals at Paychex's HR Consulting Services can offer guidance and support. We can work with you to create a benchmarking report. We'll also help by making recommendations to boost your recruiting and retention efforts.