The document outlines the importance of creating a formal compensation plan that aligns with organizational goals and secures executive support. It provides insights into developing a compensation strategy, addressing key questions, and ensuring communication throughout the process. The plan aims to attract and retain talent while ensuring fairness and motivating employees in their performance.

1. Building a
Compensation Plan
Part 1: Strategy &
Executive Support
Stacey Carroll, SPHR, CCP
Principal Consultant
PayScale, Inc.

2. PayScale is a market leader in global online compensation data.
With the world's largest database of individual employee
compensation profiles, PayScale provides an immediate and
precise snapshot of the job market.
Our patent-pending, real-time profiling system indexes custom
employee attributes (such as industry-specific certifications) and
specific job titles for every industry.
Our secure, on-demand business solutions, PayScale MarketRate
and PayScale Insight, provide employers with accurate, reliable
compensation detail never before available.
13,000 Positions. 50 Major Industries. 11 Countries

3. Agenda
• Why a comp plan?
• How to gain executive support
• Compensation Strategy
• Who is my market?
• How competitive do I want/need to be ?
• What do I want to reward?
• Writing a compensation philosophy

4. Have you ever . . . .
Had an employee come to you
with a ransom job offer from
down the street?
Had a hiring manager who insists
on paying a new hire $10,000 above
the market rate because “they must have this individual”?
Worried about the equity among your employee’s when it
comes to compensation?

5. The solution . . .
Create a formal
compensation program

6. Support for a plan has to be more than “HR”
 Unfortunately HR’s pain points are often different
than your senior executive’s pain points
 So, to get executive support we MUST:
 Identify the Exec’s pain points
 Solve real problems
 Address the costs and consequences of the plan
 Report on ROI
 Most importantly, the process should be owned by
the organization (not HR).

7. Why should you have a formal compensation program?
• Good business sense
• Compensation is one of your largest single costs of doing
business
• Attract, retain and engage the talent you already have within
your organization
• Supports the desired mission, strategy and culture of the
organization.
• Can ensure equity and fairness among employees
• Improves employee morale
• Can reduce risk to the organization

8. Creating Compensation Strategy
 Roles & Responsibilities
 Exec Team
 HR
 Directors & Managers
 Employees
 Process
 Preparation
 Decision making
 Timing

9. Preparing for the compensation strategy conversations
Start with: Then:
Where is the Where Do
Organization Now? We Want To Be?
• Growth cycle • Importance of attraction, motivation
• Demographics and retention
• Culture/management style • Market competitiveness vs. internal
equity
• Competitors and degree of
competitiveness
• The right mix of compensation
elements
• Salary administration and decision
making

10. Sample Questions to guide strategy
conversations
 What companies make up the profile of our market and where do we compete
for talent?
 How competitive do we want/need to be?
 What is it that we want to reward in this organization?
 Why is NOW the right time to change our pay philosophy?
 How will we change the mindset of employees to accept this change?
 What does success look like?
 How will we respond to employees who feel like we are disrespecting loyalty
and/or their financial well-being?
 Who will be involved in driving this initiative?
 Do we have the right managers in place to reach a successful outcome?
 Can we afford this?
 What could go wrong or what outcomes are we unprepared to deal with?

11. Strategy Outcomes
 Clear idea on how to benchmark
 Clear idea on how competitive to be with salaries
 Clear idea on the right mix of compensation
elements
 Clear idea of how people will be rewarded
 Strong executive support for compensation structure
 A commitment to clear communication

12. Communication Strategy
• Communicate about the project
• What is the organization doing and why
• What is the process
• Choose the right messenger
• Be transparent about the process
• Be realistic about the goal – no promises should be made
• Don’t give employees the opportunity to assume what the
outcome will be
• Let employees know what to expect in terms of additional
communication regarding the project.

13. Writing a compensation philosophy
 Recognize the goals of the organization
 Discuss how talent links to these goals
 Discuss how the compensation programs will
support these goals
 The philosophy should be optimistic yet not
unrealistic (representative of your organization)
 Demonstrates your commitment to ensuring fair,
equitable and competitive pay practices

14. Sample Compensation Philosophy & Strategy
Compensation Philosophy and Strategy
The philosophy behind XYZ company’s compensation program is to provide an attractive,
flexible and market-based total compensation program tied to performance and aligned
with shareholder interests. Our goal is for XYZ Company to be competitive in recruiting
and retaining employees through its high-quality compensation practices. Equally
important, we view compensation practices as a means for communicating our goals and
standards of performance and for motivating and rewarding employees in relation to
their achievements.
XYZ company competes in several different businesses, most of which are involved in
helping individuals manage financial risk and secure their financial futures. These
businesses draw their key people from different segments of the marketplace. Thus, our
compensation programs are designed with the flexibility to be competitive and
motivational within the different marketplaces in which we compete for talent, while
being subject to centralized design, approval and control.

15. Questions?

16. Save Time and Money on Your
Compensation Initiatives
PayScale is your key to saving money, recruiting talent at the right price, and retaining top performers
with accurate, real-time compensation data matched to your workplace and workforce.
Visit our blog: http://blogs.payscale.com/compensation/
Connect with me on LinkedIN: http://www.linkedin.com/in/hrstacey