In our previous post, we covered compensation principles that help ensure your company’s pay strategies produce the results required. This example can help you write a compensation policy statement for your organization.
According to an HRsoft poll, 60% of organizations have a written compensation policy statement. For those who do not, reviewing examples may provide inspiration for developing a compensation philosophy that reflects a company’s business goals and corporate culture. Here is one sample of a compensation philosophy to review:
COMPANY believes that it is in the best interest of both the organization and our associates to pay our workforce fairly for the value of the work provided, within our financial ability to do so. It is our intention to use a competitive system to determine the current market value of a position based on the skills, knowledge, and behaviors required of a fully competent job incumbent. The system will be objective and non-discriminatory. It must also be flexible enough to ensure that the company is able to recruit and retain a highly qualified workforce.
Turning philosophy into action
Of course, a pay philosophy must be upheld through action. To translate the above philosophy into an actionable process, here are the key steps the company above might take:
- The compensation system will price positions using local, national, and industry-specific survey data. We will evaluate external equity, which is the relative marketplace job worth of jobs directly comparable to jobs within _____.
- All jobs will be placed in a hierarchy based on market rate, and comparison to other jobs within _____ based on skills, knowledge, training required, experience, responsibility, and accountability.
- COMPANY intends to monitor the marketplace in which it competes for talent and when warranted, at management’s discretion, increases may be made to the base pay of incumbents whose jobs are covered by the scope of this policy.
Next in this series, we’ll cover tying pay practices into performance management so that your company can ensure equal pay is given for equal work.
McDermott Associates and HRSoft have published
a new compensation design whitepaper on this topic