This is a lesson from PayScale’s Modern Compensation Planning ecourse. Want access to all seven lessons? Sign up for the course!
By now, it’s well-accepted that a comprehensive, up-to-date compensation plan is a must for successful business. A tight talent market means organizations are focusing more than ever on strategies to retain and hire top employees, compensation being a big one. Unfortunately, putting together a strong compensation plan is no easy task. It requires in-depth thought, cross-team collaboration and real effort.
But never fear — we’ve got your step-by-step action plan. In the coming days, we’ll feature lessons from our Modern Compensation Planning ecourse, which was designed to walk you through the planning process, whether for a first-time plan or for updating an existing one.
Today, step 1: laying the groundwork and developing your organization’s pay philosophy.
The 5 Elements of a Comp Plan
Top-performing companies have up-to-date compensation plans that support their business objectives and ensure their long-term success. As an HR leader at your organization, you’ll want to efficiently lead your company through either developing or updating your compensation plan.
A strong compensation plan consists of five elements:
Get Buy-in from Company Leadership
Help your executives understand the value of having a current compensation plan. Include input from key players at your company — a sure-fire way to get them invested in the success of the plan. You can send out a questionnaire or hold meetings with certain groups or individual decision makers.
Follow these steps to gain your executives’ support:
- Identify pain points. Understand the major business priorities and how your comp plan ties closely to those priorities.
- Understand the ROI. Be prepared to explain how an increase (or decrease) to payroll will impact the bottom line.
- Calculate the cost of getting comp wrong. Show the impact of under/over paying using language that all execs know fluently: money.
Complete Your Job Descriptions
Make sure you have job descriptions for every position in your organization. Your descriptions should cover the high level basics of each job. They don’t need to be 100 percent complete, but they will be essential for matching skills, responsibilities and experience to each job position.
Develop Your Compensation Philosophy
A compensation philosophy answers the question, “What are we hoping to accomplish with our compensation dollars?” Decide how competitive your organization wants to be (e.g. exceed the market, meet the market, or maybe even fall shy of the market). Consider your organizational profile — are you a small start-up; a medium-sized, growing company; or a large, more established entity? Engaging your leadership in defining your philosophy will help to align the group around your overall compensation intentions.
Take some time to consider how to plan ahead in your organization. Planning ahead will help you with the remainder of the steps in building out your plan. Tune in for the next lesson when we cover how to define your compensation strategy.
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Tell Us What You Think
Does your organization have a compensation philosophy? We want to hear from you. Tell us about your process in the comments.