This guide is part of a progression set comprised of Core, Advanced, and Emerging Total Compensation practices. 

What it is

Generally, compensation practices are considered one of the most technical disciplines within the Human Resources function. Frequently summarized as a combination of “science” and “art,” these practices have evolved, allowing practitioners to develop strategically oriented initiatives by integrating data insights, business modeling, and knowledge management.

Identifying each job’s reason for existence, responsibilities, and scope allows compensation practitioners to understand the dynamics of the organization better and adapt the compensation strategy accordingly. Further, market data plays a crucial role in every compensation strategy. While many jurisdictions impose regulations on how market data can be distributed and accessed, it’s beneficial for every organization to identify the most prevalent and emerging trends in the relevant marketplaces, allowing the compensation designer to act as a responsible steward for the organization and determine feasible action plans.

Why use it

Considering the continuous and unforeseen changes in the economic landscape – plus inevitable shifts in employee priorities, organizations must always keep their “guard up” when attracting and retaining the type of talent they seek to employ. At its core, every element of the compensation strategy should be (i) strategically aligned with the organization, (ii) internally equitable, (iii) externally competitive, (iv) easily understood by the organization, and (v) responsibly sustainable over time. Given the finite implications from a budgetary perspective, compensation practitioners should always identify the allocation required to develop and deploy any given compensation initiative – defining a more aggressive pay mix or establishing one-time payments with a specific objective in mind. Therefore, compensation should always be seen as an investment rather than a cost to the organization.

Outcomes

The practices included provide a clear understanding of the most important concepts around compensation management and help establish solid foundations for deploying the most beneficial compensation strategy across the organization. This enhances flexibility and allows adapting to changing market conditions, organizational needs, and business growth. Understanding that one of the most essential elements of market data sources is confidence in data accuracy and good coverage of jobs in the market becomes critical. While the cost of a survey and the data export/reporting are important features to consider, they should not be the primary decision drivers.

Through a set of different examples and commonly found situations in the market, the practices at this Core level will provide confidence when communicating compensation programs to leadership and employees, considering there will be a strong alignment between the compensation strategy and the overall HR model. Developing a fair, consistent, and clear framework on which to define salaries across the organization will contribute to equitable pay conditions and a robust method to budget the cost of labor for new jobs within the organization. Further, various options are included to differentiate pay based on levels and physical location, which has gained significance as hybrid (location) work became commonplace.

Practice guides at this level

Defining a competitive, sustainable, and compliant compensation strategy.

Creating clear linkages between compensation and business strategies, with well-defined plan fundamentals, administrative calendar of events, and roles and responsibilities.

Establishing a robust methodology for job descriptions and evaluations across the organization.

Developing a consistent standard for job descriptions and an approach to compare jobs across functions and levels in a way that allows the cataloging and auditing of all roles for fairness and equitable pay levels throughout an organization.

Identifying and sourcing market data to support decision-making and future organizational plans.

Sourcing and leveraging comparative job pricing data congruent with relevant laws and regulations enables the generation of competitive wage and salary levels aligned with a desired market position.

Creating salary structures to attract and retain the right talent for the organization.

Building salary structures that support competitive pay levels and career progressions based on individual employee's credentials, experience, and performance levels as they progress in their careers.