how to design a compensation and benefits package

^{6 ways to design a strong benefits and compensation program}

1. Define your compensation philosophy. Before deciding on a compensation program, your company should define its compensation philosophy and articulate it with a clear, focused statement.
2. Link compensation to business strategy. Design your compensation program to reward behaviors that advance your company’s strategic objectives.
3. Consider your culture. A compensation program can effectively reinforce your company’s culture, and vice versa. ...
4. Connect value creation to compensation. In order to reward behavior that drives results, you need to know what creates value in your company — both from the perspective of ...
Market your total compensation package. Most employees think of compensation as base pay. In order to attract and retain top talent, you need to market your total compensation package.
Measure your return on invested payroll dollars. How do you know whether you’re getting a good return on your invested compensation dollars? Simple: Measure it.

Full Answer

Is your total compensation package making a difference in the workplace?

Employees may focus on base pay when thinking about compensation, but their compensation extends beyond just their base salary. In this competitive labor market, presenting employees with a compelling total compensation package can make the difference in your recruiting and retention efforts.

How do I design an employee benefits program?

An important first step in designing an employee benefits program is to identify its objectives. This will provide overall guidance in establishing the selection and design of the benefits program.

What are the components of a compensation plan?

A compensation plan includes all the components of your employee compensation packages. This includes a direct form of compensation such as hourly wages, salaries, commissions, and bonuses, as well as employee benefits, and other types of incentives.

What kinds of incentives can be included in a compensation package?

Perks such as gym membership, tuition, cell phone service, and company discounts can all qualify as part of a compensation package along with equity, stock, and other long-term incentives.

How do you create a compensation package?

How to create a compensation planDevelop a compensation philosophy. ... Gather relevant data from multiple sources. ... Benchmarking external to internal positions. ... Create a job description for each position. ... Develop the pay structure. ... Establish the cost of the pay structure. ... Document the compensation plan.More items...

What should be included in a compensation package?

Components of employee compensationSalary and wages. In a compensation package, these typically make up the single largest component. ... Bonuses. ... Federal/state pay requirements. ... Long-term incentives. ... Health insurance. ... Life and/or disability insurance. ... Retirement plan. ... Time off.More items...•

How are compensation packages determined?

Your Current Compensation Is Determined by These Factors Essentially, it's a combination of the value of your pay, vacation, bonuses, health insurance, and any other perk you may receive, such as free lunches, free events, and parking. These components are encompassed when you define compensation.

What is a compensation package example?

Compensation may include hourly wages or an annual salary, plus bonus payments, incentives and benefits, such as group health care coverage, short-term disability insurance and contributions to a retirement savings account. A total compensation package can have several components.

What are the four types of compensation?

The Four Major Types of Direct Compensation: Hourly, Salary, Commission, Bonuses. When asking about compensation, most people want to know about direct compensation, particularly base pay and variable pay.

What are all the three basic compensation strategies?

Here are the three most popular types of compensation packages and a few notes on who might be most attracted to them.Straight salary compensation. ... Salary plus commission compensation. ... Straight hourly compensation.

What is a compensation plan?

A compensation plan is a formal document that states an organization's stance on employee pay and rewards. A compensation plan varies from one organization to another, depending on its compensation philosophy and prevailing market conditions. In the absence of a compensation plan, a company has no frame of reference on how to compensate employees.

What are the types of compensation plans?

The most common types of compensation plans are salary, hourly and commission-based compensation plans:

How to create a compensation plan

One of the most fundamental functions of management is to craft a compensation plan that is equitable, competitive and encourages employees to produce stellar performances. However, there is no one-size-fits-all plan applicable to all organizations and therefore knowing how to come up with one is essential for your business.

The Two Types of Compensation

There are two types of compensation: direct and indirect. Direct compensation pertains to monetary benefits, such as salary (for exempt employees), an hourly wage (for non-exempt employees), commission and bonus pay.

Not sure where to start? Talk to someone who wants to listen

A great plan starts with a conversation. Let’s talk about what you need.