How to Develop a Compensation PlanA good compensation plan for the company is based on three anchors: Internal considerations, external considerations, and job performance.
All the above seem obvious, yet many companies practice capricious salary program based on likes and dislikes. Compensation plans should be considered and developed carefully. Internal Consideration - This requires ranking all the jobs in the organization and the contribution of each job to the organization. This is where you rank the accountant above the warehouse guy. Or even within Accounting, the one with CPA degree higher than the one with an accounting degree. External Consideration - Use salary surveys to help determine whether you are paying your your people what others are paying. You have to be aligned with your industry; otherwise you will lose your staff. For example, retail clerks should be paid the going rate for the retail industry. Salary equity has to be there. Job Performance - This is where management recognizes proficiencies within the same levels. Sometimes the company establishes ranges of salaries for the same job. You might also want to visit the page regarding performance and compensation ratio Governments and large corporations do that. This can be done in smaller companies as well.
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