Compensation Philosophy
Compensation is a key building block of engaging and maintaining your workforce. It functions as a reflection of your brand identity and your values. Especially with today’s labor market, potential employees are looking for evidence of pay equity and consistency between what employers say they offer and what they do offer. And at the same time, businesses want to ensure their pay practices are competitive and scalable.
At Paidwell, we support these high-growth organizations that are looking to build & implement competitive and data-driven compensation programs. Based on our many client relationships, we find there are three initial straightforward questions clients have:
How much should we pay for our roles?
How can we hire better-qualified individuals, faster-- and keep them happy?
What do other similar companies pay their employees?
However, the answers to these questions are not as straightforward as they appear. Pay is only limited by your own resources, statutory requirements, and your organization’s ability to absorb the consequences of pay decisions. You can literally pay as much or as little for roles as these boundaries allow-- your options for compensation program design are almost infinite.
The Key Point to Understand is that: Compensation is a fundamental driver of culture and business strategy. A compensation philosophy is a point of view to communicate what your firm literally values, what it rewards, and why. It explains how your company intends to make decisions about pay. Your compensation philosophy should drive consistency in your pay programs and ensure that rewards strategies and decisions are supported by a distinct point of view aligned with the company’s culture.
So, where do you start? How do you decide what goes into your rewards programs and how do you know they’re working?
We start by asking clients to reflect on what’s most important to them and what drives their business. Determining what kind of company culture they want to build, and examining their current challenges are also essential to building a compensation philosophy. There is no “quick fix” solution to compensation because it needs to be tailored to each individual business.
So what should be included in my Compensation Philosophy to be effective?
There are a number of factors to consider here, including:
Performance alignment
Does your company pay for performance or do you intend to pay top of market? Either decision has all sorts of implications for performance management, talent management, managerial expectations, etc.
Clarity
To what extent does your firm want to be transparent about compensation programs, pay practices, or even individual pay?
Your compensation philosophy should clearly articulate your rewards program components that you’re comfortable communicating to employees at all levels.
Values
What core values will be expressed in your pay programs? Often companies commit to equity, fairness, inclusion, fiscal responsibility, investor value, employee experience, and other areas in their compensation statements.
I urge you to consider where your company struggles in your own compensation program and how you can set yourself apart competitively. Research how your employees feel about your current program and deeply examine whether your company vision and values are accurately reflected in its offerings.
Paidwell’s objective is to provide world class, competitive and scalable compensation programs to high growth organizations. Our experienced team of HR professionals are here to help guide you through building and implementing a compensation philosophy to meet the current and future needs of your business.
