What are some tips for developing a compensation plan?


Quick Answer

When developing a compensation plan, use accurate pay information from market surveys, consider internal and external equity, select a format that all organizational members agree to, and develop a written pay policy, advises the American Society of Association Executives. Supplement the compensation plan with sound management practices and good working conditions.

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Full Answer

A good compensation plan reflects the culture of the organization, keeps compensation costs under control, motivates employees and ensures equity, states Business and Legal Resources. When developing a compensation plan, assess salary surveys to see how much other employers pay for different job positions, and set salaries close to this market data. Conduct internal job analysis, evaluation and pricing to develop a compensation program that reflects differences in organizational roles. Consider incorporating performance-based compensation plans to increase the productivity of employees.

Involve employees in developing job descriptions that form the basis of compensation plans and other human resource initiatives, recommends the American Society of Association Executives. Develop a pay policy based on education, skills, experience, job tenure, or a combination of these factors, and stick to it. A written policy ensures that compensation is consistent and avoids potential discrimination. Review job descriptions and compensation plans annually to incorporate changes that occur.

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