What Layout Should a Compensation Plan Follow?


Quick Answer

To create an effective compensation plan, administrators should take into account the current state of the organization, understand choices for change, think decisions through, consider the rollout as part of the plan and keep governance in mind, says WorldatWork. A plan should also be geared to meeting new demands.

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Full Answer

The first step in this process sets the priorities by getting a clear picture of the present condition financially and evaluating the strengths and weaknesses of current procedures, according to WorldatWork. This step also evaluates the current incentive plan as a whole and how it is being administered. The following step considers change options, including in pay levels, payout calibration, goal benchmarks and administrative procedures. To think decisions through and carefully implement changes, a judiciously selected plan design team is crucial. Changes should also be tested in a variety of scenarios to ensure they are what the team wants.

Both obvious commitment at all levels and a detailed rationale for the implementation of the compensation plan should be readily available to anyone affected by it, reports WorldatWork. The more effective plans are the ones that are best understood by the workforce. Keeping this in mind, the planning and implementation of the plan should always keep in mind the organization's governance and follow procedures according to the bylaws.

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