7 Tips to Developing an Effective Compensation Strategy
Having a compensation strategy is vital to providing fair, equitable compensation and is one of the key pillars to attracting and retaining top talent. Today, companies are faced with the tremendous challenge of balancing competitive, transparent pay practices in a tight talent market with fiscal responsibility amongst growing inflation. A compensation strategy can support organizations in navigating this economic climate and lay the foundation for long-term success. Here are our top 7 tips when developing an effective compensation strategy.
- Have a strategy and plan designed for your company. This should be aligned to your organization’s mission or business outlook as well as your organizational culture. It should address equity and fairness, compliance, and total rewards.
- Conduct benchmark salary studies. Research to define, value, and analyze market data to establish a benchmark of your organization’s compensation against others in the market. Internal job descriptions should be matched to external jobs with similar experience and responsibilities to identify a market rate for each position.
- Develop a formal salary structure. Set a framework for fair, equitable and competitive pay at each level of the organization. Salary administration programs define how the company manages compensation and will create transparency for employees around salary and career growth.
- Conduct equity reviews. Ensure you are offering fair wages to employees who do the same job. Ideally, employees with similar job responsibilities, experience and tenure should be paid comparably. With an equity review, you can evaluate every employee’s salary, identify anomalies, and make necessary adjustments through a thorough analysis.
- Take a Total Rewards approach. Your total compensation package can include base pay, bonus or incentive pay, benefits packages, paid leave, and other perks. The inclusion and distribution of each of these areas as part of your total compensation should align with the strategy of the organization and the level of the role.
- Consider Executive Compensation reviews. Ensure that your top leadership is paid in line with competitive offerings, help mitigate risks and ensure that your total compensation packageis the right fit for your executives.
- Perform employee experience surveys. Assess satisfaction and motivation levels by soliciting feedback that can be used to inform your talent strategy.
At Exude Human Capital, we understand the challenges that businesses face, particularly when designing compensation strategies and executing those plans. Our highly experienced compensation and benefits team will share best practices from both the nonprofit and for-profit sectors as we work with your team to review and design compensation programs that support your talent strategy. We believe that compensation is both an art and a science, and we work closely with you to find the appropriate balance to create a competitive compensation strategy. We work to support you in attracting and retaining top-tier executives and talented employees, while maintaining fiscal responsibility and not unduly straining your budget and resources.
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