5 steps to a smart compensation plan

bamboohr.com payscale.com5 Steps to a Smart Compensation Plan... bamboohr.com payscale.com5 Steps to a Smart Compensation Plan 5 steps to set up your compensation plan Gain executive sup

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bamboohr.com payscale.com

5 Steps to a Smart Compensation Plan

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Rusty Lindquist Rita Paterson, CCP

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5 steps to set up your compensation plan

Gain executive support.

Define your compensation strategy.

Develop a market-based pay structure.

Build pay ranges.

Implement a total rewards plan.

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Step 1: Gain Executive Support

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Payroll is, by far, a company’s

biggest expense ; the cost of getting it wrong is tremendous.

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Pay is the number 3 reason people quit jobs [BambooHR study] If employees aren’t being paid what they’re worth, they will find it somewhere else.

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Top Compensation Mistakes

• Not updating compensation regularly

• Not empowering managers to fix problems

• Not being transparent

• Giving across-the-board raises

• Not having a structured plan

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the bottom line.

1 They make good business sense.

2 They help attract and retain talent.

3 They support your company’s mission,

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– Ram Charan

Best-selling Author,

World-renowned Business Advisor

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the opportunity to spread their wings and put compensation as a carrier behind it,

—Jack Welch

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Step 2: Define Your Compensation Strategy

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Questions to ask:

• What is your market?

• What are your goals?

• How competitive do you need to be?

• What should you reward?

• Is your current strategy working?

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What is the right compensation

mix for your company?

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—Harvard Business Review

extraordinarily clear which

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Step 3: Develop a

Market-Based Pay Structure

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Decide on the correct job evaluation method.

Market Pricing v Point Factoring

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Choose the right data source

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Step 4: Build Pay Ranges

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Schedules preserve both competitive pay to local markets and internal equity

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The number of pay grades you use will influence your midpoint differential and should sufficiently distinguish difficulty levels of different jobs.

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Some considerations include

• How wide should my ranges be?

• How much overlap between pay ranges is good?

Build Pay Ranges

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Using Pay Ranges

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Use market data Verify internal alignment

Assign Jobs to Grades

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Basic Function

& Key

Differentiators

• Administrative Accounting Functions

• Prepare financial reports

• Interpret financial reports and statements for management

• Analyze financial data

Bachelor’s DegreeCPA required at start

Critical Skills at • Attention to Detail • Attention to Detail • GAAP • GAAP

Accounting Assistant

Senior Accountant

Accountant I

Accountant II

Build Career Path

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Step 5: Implement Total

Rewards Plan

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Compensation Plan Element

• Philosophy

• Strategy

• Ranges

• Policies

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Budgeting for Increases

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Deal with Outliers

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• Educate them

• Give them the big picture

• Give them tools

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1 Talk with executives about the need for an

updated compensation plan.

2 Research market data for your employees’ jobs.

3 Create a pay structure to ensure internal equity.

4 Review your current compensation policies and

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COMP & CULTURE

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Everything you do becomes part of that story…

The story of what you value

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Compensation:

The story of how much you are valued

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Compensation:

The keystone

of culture

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Follow BambooHR and PayScale on social media:

bamboohr.com/blog | payscale.com/compensation-today

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