The document outlines 5 steps to developing a smart compensation plan: 1) gain executive support by emphasizing compensation's impact on retention and the bottom line, 2) define your compensation strategy by determining goals and market, 3) develop a market-based pay structure using appropriate job evaluation and market data, 4) build pay ranges by identifying differentials, pay grades, and guidelines for movement, and 5) implement a total rewards plan by finalizing all compensation elements, budgets, outliers, and empowering managers. Following these steps can help attract and retain top talent through a compensation plan aligned with business needs.
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5 Steps to a Smart Compensation Plan
Rusty Lindquist
VP STRATEGIC HR INSIGHTS
BambooHR
Rita Paterson, CCP
MANAGER OF CUSTOMER EDUCATION
Payscale
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5 Steps to a Smart Compensation Plan
5 steps to set up your
compensation plan
Gain executive support.
Define your compensation strategy.
Develop a market-based pay structure.
Build pay ranges.
Implement a total rewards plan.
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5 Steps to a Smart Compensation Plan
Payroll is, by far, a company’s
biggest expense; the cost of
getting it wrong is tremendous.
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5 Steps to a Smart Compensation Plan
Pay is the number 3 reason people quit jobs
[BambooHR study]. If employees aren’t being paid
what they’re worth, they will find it somewhere else.
Executives must care about compensation
if they care about retention.
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5 Steps to a Smart Compensation Plan
Top Compensation Mistakes
• Not updating compensation regularly
• Not empowering managers to fix problems
• Not being transparent
• Giving across-the-board raises
• Not having a structured plan
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5 Steps to a Smart Compensation Plan
Compensation plans help
the bottom line.
1. They make good business sense.
2. They help attract and retain talent.
3. They support your company’s mission,
strategy and culture.
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5 Steps to a Smart Compensation Plan
“If you pick the right people and give them
the opportunity to spread their wings and
put compensation as a carrier behind it,
you almost don’t have to manage them.”
—Jack Welch
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5 Steps to a Smart Compensation Plan
Questions to ask:
• What is your market?
• What are your goals?
• How competitive do you need to be?
• What should you reward?
• Is your current strategy working?
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5 Steps to a Smart Compensation Plan
—Harvard Business Review
“Keep the plan simple. It should be
extraordinarily clear which
outcomes you are rewarding.”
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5 Steps to a Smart Compensation Plan
Identify Market Differentials
Schedules preserve both competitive pay to local
markets and internal equity.
Baltimore
+5%
Dallas
Main
Minneapolis
+5%
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5 Steps to a Smart Compensation Plan
Determine Your Pay Grades
The number of pay grades you use will influence your
midpoint differential and should sufficiently distinguish
difficulty levels of different jobs.
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5 Steps to a Smart Compensation Plan
Some considerations include
• How wide should my ranges be?
• How much overlap between pay ranges is good?
Build Pay Ranges
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5 Steps to a Smart Compensation Plan
Evaluating employee placement in range.
Developing guidelines or policies for movement.
Using Pay Ranges
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5 Steps to a Smart Compensation Plan
Basic Function
& Key
Differentiators
• Administrative
Accounting Functions
to support AP & AR
• Update General Ledger
• AP / Vendor Relations
• AR
• Maintain General
Ledger
• Prepare financial
reports
• Interpret financial
reports and statements
for management
• Analyze financial data
• Prepare budgets
Degree &
Certification
Requirements
None Bachelor’s Degree
No certification required
Bachelor’s Degree
CPA required at proficiency
Bachelor’s Degree
CPA required at start
Critical Skills at
proficiency
• Attention to Detail
• Excel
• Data Entry
• Quickbooks
• Attention to Detail
• Quickbooks
• GAAP
• General Ledger
• Monthly Reconciliation
• Financial Reporting
• GAAP
• Financial Reporting
• Financial Analysis
• Budgeting
Years of
Experience
• 1-2 at proficiency • 3-5 at proficiency • 5-7 at proficiency • 8-10 at proficiency
Accounting
Assistant
Senior
Accountant
Accountant I
Accountant II
Grade C Grade E Grade 5 Grade 7
Build Career Path
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5 Steps to a Smart Compensation Plan
Strategies: Equip Managers
• Educate them
• Give them the big picture
• Give them tools
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5 Steps to a Smart Compensation Plan
What can we do now?
1. Talk with executives about the need for an
updated compensation plan.
2. Research market data for your employees’ jobs.
3. Create a pay structure to ensure internal equity.
4. Review your current compensation policies and
decide where updates are needed.
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5 Steps to a Smart Compensation Plan
Follow BambooHR and PayScale on social media:
bamboohr.com/blog | payscale.com/compensation-today
Thank you!
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5 Steps to a Smart Compensation Plan
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