Compensation Strategy: Definition & How-to Guide

The company has undergone massive layoffs, slashing 27,000 corporate jobs in 2023 and another 2,100 positions in early 2025, with further reductions in middle management expected this year. It highlights key takeaways from each organization you can use to build a compensation strategy that’s meaningful to you. This article explores six examples of a compensation strategy from real-world companies. Get it right, and you build a workforce https://alliancetac.com/leadership-and-management-training/onsite-course/succession-planning-developing-your-leadership-pipeline-course-outline that feels valued and motivated.

• Compensation strategy is dependent on the overarching strategic compensation framework to define its direction and scope.
• If you’re looking for support with your compensation planning, talent retention or attraction strategies, Pierpoint can help.
• This can range from sharing salary ranges for open positions to providing employees with clear information on how their pay is determined.
• Strategic compensation involves prioritizing certain key staff over others, which may lead to allegations of bias, favoritism or discrimination.
• One study of workers in Sweden finds that perceived fair treatment led to higher employee motivation and healthier lifestyle decisions.9 Another study in the United States reports that women experiencing compensation inequity were twice as likely to suffer from depression and four times as likely to suffer from generalized anxiety.10

However, every business can get a clearer picture of where they stand in the labor market by examining flexible working benefits as part of their overall compensation strategy. Almost 90% of HR professionals ranked health-related benefits as very or extremely important in the latest SHRM Employee Benefits Survey. Before implementing a blanket strategy, consider the various factors, such as role within the organization, career stage and personal priorities, so your performance-based pay matches your team. For example, a salesperson may be more motivated by performance-based pay than someone who is in the marketing department. Reviewing your compensation strategies annually and providing time to look at market conditions, business performance and employee feedback should become second nature. Determining if your base pay is competitive and adjusting as necessary is foundational in a comprehensive compensation package.

A comprehensive compensation strategy goes beyond salaries, it reflects what your organization values, how you compete for talent, and your commitment to fairness and clarity. New, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day. Benefits like tuition reimbursement, healthcare, and stock options apply even to part-time workers.

0 What is a compensation strategy?

If this is the first time you’re thinking of strategic compensation, you might not have an official strategy in place. https://consultprofound.com/accounting-insights-navigating-growth-and-technology-trends.html?noamp=mobile You can’t create a new strategy without analyzing the current one. It is also useful when navigating through difficult times such as a recession or a pandemic by making costs easier to track over time. An effective strategic compensation strategy helps to ensure pay equity and allows companies to be more transparent with employees regarding compensation amounts and raises. A strategic compensation strategy is the way to make that happen.

A profit-sharing compensation strategy is when a portion of a company’s profits are distributed among its employees. A base salary plus bonus compensation strategy is similar to a base salary plus commission compensation as it incentivizes performance. A base salary plus commission compensation strategy is when you pay an employee a fixed base salary with additional commission for achieving certain sales or performance targets.

Essential Questions for Structuring Time Off

• Strategic compensation benefits both employers and employees by creating a work environment that fosters growth, productivity, and success.
• Below, members of Forbes Finance Council outline strategies for structuring compensation packages that work across all levels.
• In 2017, a global audit against this framework discovered that 7,252 employees in 37 different countries were paid below the living wage specified by the framework.
• A clear, compelling, and consistently applied compensation strategy makes you a more attractive employer and helps you keep the people you’ve already invested in.
• Shani has previously written for multiple publications, including HuffPost.

Progressive compensation strategies must account for what today’s professionals expect from their employers. To create a strategic compensation strategy you’ll need to assess your current situation and ask for your employees’ feedback. A strategic compensation plan also considers how you pay your workers, the company’s bonus structure, and when your staff is eligible for raises.