Compensation, Hiring Strategy, HR Innovation, HR Management, HR Strategy

Comp and Circumstance

I have no doubt that compensation planning is at the top of mind for most business owners and leaders. We are having regular conversations with business owners around compensation planning. Although the topic isn’t unusual, the number of these conversations since the pandemic have certainly increased as business owners are recognizing the need. Why such the increase? It’s not just a motivational poster to say that your employees are your most valuable asset. With payroll costs averaging around 30% of a company’s revenue (or more for highly service orientated operations), your people are an investment, and it’s important to be investing wisely. It takes a careful and strategic approach to balance your companies financial health and operational goals with attracting, rewarding, and retaining employees.

What all do we consider in a compensation plan? Mostly, we are focusing on the tangible cash and non-cash benefits that can be assigned a value. Salary, bonus, incentive/commission, benefit contributions, retirement plans, etc. all go toward total compensation.

Cash Compensation

Direct cash compensation refers to the pay an employee receives for their work. Attracting qualified candidates to join your company. While everything that we are going to list here is important, “cash is king” and is the most significant piece to the package you offer employees. All too often, our Senior Recruiting Consultant, will be asked to find a candidate with unrealistic compensation rewards. Unfortunately, we can’t find you a CFO with ten years of progressive experience, a CPA, and demonstrated management of risk mitigation when your salary offered is $55,000. Employers must have realistic expectations when it comes to offering rewards.

Health and Well-being

Well-being perks can include benefits to promote a healthy harmony between work and home. These should include health benefits (don’t just offer the minimum) and EAPs, as well as gym memberships or mental health services. Also, the work environment you provide is a significant contributor to your well-being package.

Benefits & Perks

Time off, remote working, childcare support, or home office allowances. Any of these would be considered additional perks for a company. Consider your products or services and how perks aligned with them might benefit employees to enhance your overall culture and mission.

Training & Development

If an employee feels they aren’t being paid well, and they aren’t getting opportunities to better themselves through training and development, they will feel they may not have the opportunity to make more at your organization. Having a career pathing plan with training opportunities will keep your employees motivated and engaged – and give them a reason to stay with your company.


While it should go without saying, recognizing your employees for their work and the impact they have on your organization is critical to a health culture and for employees to feel they are being treated according to their worth. Employees who feel that they are appreciated and acknowledged will stay longer, and, most importantly, will stay during hard times.

Many leaders know all of this, but still haven’t developed a compensation philosophy. Why is that? It’s a lot of work. However, once done, it will set up an infrastructure that will make everything easier from recruiting to performance management. Let’s break it down into steps:

Determine your compensation philosophy

Your compensation philosophy sounds daunting, but it’s really just your company putting down on paper how you commit to pay your employees. Consider these areas to be your best plan for a healthy compensation philosophy:

a. Market Competitiveness,

b. Performance Increases, and,

c. Managing Incentive Plans, etc.

Do your industry/market research

It’s hard to know what to pay if you don’t know what everyone else is paying. These trends determine the market rate, and if you aren’t keeping up, you won’t be able to hire or retain employees.

Look inward – internal equity is critical

A compensation strategy is not just for recruiting new talent. It’s for retaining the employees you have. All too often, compensation changes are made only to impact incoming talent and the existing staff is left behind. This leads to pay compression, or the even worse pay inversion, and your new hires end up making more than your long-term employees doing the same job.

Align your planning with your business goals

Establishing your compensation structure and philosophy should be as clear as establishing any organizational goals and planning. You have your mission, vision, and values, and you have your revenue goals. The only way you can achieve any of these is by having the right people in the right spots.

Get it on paper

Next is the step to take your philosophy, combine it with your research, align it with your goals, and put tactical steps into place. What will your starting rate be for employees? What will your pay ranges be for roles? What do you need to do to adjust current employees to get them to fit with the new structure? Note: one thing that also needs to be considered is Executive Compensation. That topic is worth another blog all its own. Just know that your Executive plans may vary from the rest of the structure, as will your expectation of these roles and how much of their pay can and should be tied to company performance.

Still feel a little overwhelmed? You aren’t alone. It’s a big job, and, unfortunately, that’s why it’s often overlooked. Having the right HR Partner to collaborate with you through the process is key. We can help you to establish your compensation philosophy and put a competitive compensation plan in place that will have new meaning and outcomes to your ROI.

Overwhelmed By Comp? We Can Help.

Sign up to stay up to date

Stay informed about HR issues that matter to you with customized news delivered monthly to your inbox. Sign up now and we’ll share the most relevant developments in the world of HR.