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How To Utilize Employee Compensation for Optimal Results

Employee compensation was identified as the second-largest concern of executiv

Employee compensation was identified as the second-largest concern of executives who were polled in CFO Magazine’s Global Business Outlook Survey, as labor costs often compose between 40 and 70 percent of a firm's operating budget.

Finding a way to draw in and keep the best people without spending too much is a substantial challenge, according to Smart Business. Optimizing resources utilized for paying employees can not guarantee strong business results, but careful planning of incentives makes a company more likely to succeed. Many companies have established significant data on the productivity and labor costs of their employees, which can aid this process.

"You can’t succeed by taking a one-size-fits-all approach," Jed DeVaro, Ph.D., chair of the Department of Economics, College of Business and Economics, at California State University, East Bay, told the media outlet. "Companies need to analyze historical data, elicit employee preferences and strategically allocate expenditures to maximize their return on employee compensation."

Although many companies have operated in survival mode during the recent downturn and the subsequent tepid economic recovery, the gradual improvement in the global economy could result in companies placing more of an emphasis on using compensation to attract and retain the best workers. 

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