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Compensation
Strategy
What is the compensation strategy?
How does the compensation strategy drive performance and innovation?

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The compensation strategy sets a clear guidance for the key remuneration
principles in the company. The strategy defines key strategic behaviors and
values, which are remunerated. It defines the values and behavior, which are
valued and rewarded. The compensation strategy makes the dierence between
the focused strategic compensation and a bunch of dierent non connected
compensation components.

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Content
(1) About cHR
(2) What is the Compensation Strategy?
(3) Key Components
(4) Common Implementation Approach

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About
creative HRM is a website covering many HR related
topics... HR Management, HR Management Practices,
HR Strategy, HR Models, HR Business Partnering Model,
HR Processes, HR Development, Organizational
Design ...
The website is new and fresh, a lot of new content will
be added during 2013. Please, follow creative HRM as
you do not miss any news... cHRM Twitter

Please, feel free to visit creative HRM

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What is the
Compensation
Strategy?
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Compensation Questions
Compensation Strategy Challenges

HR enjoys raised expectations of the top

executives. They want HR to increase the
performance, to retain key employees, bring new
skilled talents to the company and they want to
keep costs under a strict control

Finding, motivating, developing and keeping

employees is a key component of business
success

The compensation components cannot be

managed discretely, they have to be a part of the
overall strategy - the company has to dene the
competitive compensation strategy

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Compensation Strategy
Key Components
PAY

BENEFITS

CAREERS

Base Pay
Overtime Pay
Short term incentives
Lump Sum Payments
Cash Prot Sharing
Long Term Incentives
Performance Plans
Equity Plans

Retirement
Health
Paid Time O
Income Protection
Death Benets
Work/Life Balance
Other benet policies

Skills enhancements
Leadership Development
Career Advancement
Promotion Process
Employment Stability
Nature of Work
Rotations and Job Enrichment

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Key Components of the

Compensation Strategy
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Pay
Key Compensation Strategy Components

The key component for the right positioning of the

company on the market

Generally, the higher pay can attract skilled employees

and reduce turnover if aligned with right values

The right pay depends on key values and behavior the

company want to reward

Most successful companies do not use the competitive

pay as the advantage; they set the proper mixture of
the pay, benets and career opportunities.

Changes to pay are quick to implement, but they can

become extremely costly to the company

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Benefits
Key Compensation Strategy Components

The attractive benets package can be a real competitive

advantage - if benets oered are aligned with the corporate
culture and values of the company and employees

The company has to dene its strategy for benets. It is simple to

lay one benet over another one. The company has to manage
costs of providing benets. It has to dene its core benets, which
will be used as a basis for building the competitive advantage

Flexible benets are usually seen as the best alternative, but the
company loses the option to put its corporate extra into the
package

Benets do not increase the satisfaction of employees, but they

are seen important when the employee considers another job
oer

Benets can be used as a great reward and recognition tool

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Careers
Key Compensation Strategy Components

Careers represent the future value to employees of staying with

the company

The opportunity to learn and grow is highly valued by many

employees

The proper career management is also a strong cost

management tool for the company

Careers are always connected with the strong performance

management process and with the succession planning
processes

Many companies do oer specialized career opportunities and

they let employees leave after a limited period of time (and they
are valued for)

The position and weight of the career management in the reward

mix depends on the industry and the mixture of employees

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How to develop an
eective Compensation
Strategy?
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Compensation Strategy:
The development process
1. Review the business environment. Understand the
key factors outside the company.
2. Assess the business design. What are your key
business drivers, goals?
3. Examine critical HR implications. Articulate the role
of employees in executing the business strategy.
4. Measure the internal reality. What do you reward?
How? Why?
5. Identify gaps and priorities. What needs to be xed
or changed? When?
6. Develop the action plan. Measure it.

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Please, feel free to visit creative HRM

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About
creative HRM is a website covering many HR related
topics... HR Management, HR Management Practices,
HR Strategy, HR Models, HR Business Partnering Model,
HR Processes, HR Development, Organizational
Design ...
The website is new and fresh, a lot of new content will
be added during 2013. Please, follow creative HRM as
you do not miss any news... cHRM Twitter

Please, feel free to visit creative HRM

creative HRM
pondl, 30. z 13