There are countless ways that HR can help the people of your organization achieve your objectives. Understanding principles like compensation, culture, learning, and engagement is the first step. But here’s the question: what do you do next? What changes will provide the most benefit for your organization?
Every compensation plan needs a philosophy, which is a statement that outlines the high-level goals that your organization is looking to accomplish with its compensation budget.
A compensation philosophy clarifies to your employees what your company believes in, what values you hold dear, and what you’ve chosen to reward.
Define Your Compensation Strategy
A defined strategy will answer these questions:
Which talent market(s) do you compete for talent in?
How competitive do you want to be in regard to others in your talent market?
What do you want to reward? Tenure? Performance? Specific skills? A combination of these things?
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Perform Salary Benchmarking
Ideally, you’ll want to have at least two to three data sources to work from to guarantee the accuracy of your results.
When selecting your benchmark jobs, start with those positions that are standard across different industries. Next, choose industry-specific positions that are standard at your company compared to positions in other organizations within your industry. Avoid using positions that are a blend of two or more positions. Don’t force matches to market data for non-benchmark positions.
Develop Pay Ranges
Pay ranges are guidelines for paying people based on the market value of their jobs. Pay ranges also help smooth out daily or monthly market fluctuations and set upper and lower bounds of possible pay.
The market value approximates the midpoint of the range. Typically, you’d bring people into a job at or near the minimum of the range and as they gain skills and experience, they’d move up the range. Essentially, you pay people at market once they’ve demonstrated their value.