Employee Compensation: Are you strategic or “flying by the seat of your pants”?
May 12, 2016

Organizations of all sizes struggle with employee compensation and small to mid-size organizations have even greater challenges. Balancing “fair” compensation with your greatest expense (payroll) keeps business owners and heads of HR up at night. The key to an effective compensation program is to have a strategy, be transparent and benchmark your industry and geography on a regular basis. Gone are the days of “going with the flow” and paying your people what you think the market demands.

Start with position descriptions

Just as you develop a strategic plan to run your business, you need to develop a compensation plan to compensate people appropriately. You will need to develop comprehensive Position Descriptions for all positions.

Develop a point of view

Decide if you want to pay at market, below or above, and what types of benefits you want to couple with the pay structure. People today look for a full package, and how all of the pieces help them to live their lives in the manner in which they are, or want to become accustom with! You will also want to decide on how to actually know what the market is paying in your industry and geographic location (and organization size). Then, what about incentive pay? How about evaluations and paying for performance? So much to think about!

Be transparent

Share the process with two-way communication. Build it into your culture – hold monthly meetings, share within the performance development system. Tell all what your philosophy is, and explain the reasoning. Listen to the feedback and try to incorporate that into your process moving forward.

Seek help

Seek outside help if need be! Most smaller organizations do not have a “Compensation” department to keep on top of the “latest and greatest” in the world of “work”. As a matter of fact, they usually put that on the current Payroll person to keep up with, who may or may not already be “saddled” with the rest of the Human Resource function.


Plan ahead and ask yourself the following questions:

  • How do I determine what my compensation and benefits strategy will be?
  • How do I determine what the Market pays?
  • What types of reviews do I do?
  • How do I pay for performance to ensure good employee engagement and productivity?
  • How do I address all of these issues and stay current while running my business?

This is a Juggling Act, so you need to create a very comprehensive plan to address all of the items mentioned above. You may need to get some outside help to get it right!

Looking for more insight into compensation best practices? Join us for a 30-minute webinar on May 26th at noon. Leesa Schipani and I will be discussing compensation strategy in greater detail. This compensation webinar is one of many topics that are a part of our Small Bites Series (a taste of HR).

Photo Credit: Janeen via Flickr

Lois Krause

Lois Krause


With 25+ years of experience, Lois Krause's HR strengths include labor law, employee relations, OD, and performance management. Lois has advanced HR certifications.


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KardasLarson is a human resources and business consulting firm that maximizes employee performance so people and organizations prosper.



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