Absolute HR Group

It is important to develop your compensation strategies before you set out to recruit employees.  A strategic plan for employee compensation determines how much you will pay for each position and the employee benefits you will provide.  It should be developed with several things in mind including what type of employee you want to attract and how are you going to retain these employees once hired.  If you do not establish a compensation strategy, you may be faced with issues related to pay equity within your company as well as problems with recruiting top talent.  A successful compensation strategy will equip your company to compete in the market for the best employees.

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Primary Reasons for Developing a Compensation Strategy

 

• Attracting quality employees is a primary reason for developing this strategy because no matter how well you recruit, if your compensation package is not attractive and competitive, you will fail in this area. Either you will not be able to attract them to accept your offer of employment or they will leave for a more lucrative compensation package later.

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• Compensation pay is not always apples for apples. This means that compensation packages will vary according to industry, geographical location and company size. For example, an accountant working for a large financial institution may be paid very different from an accountant working for a small manufacturing company. So, although you may not be able to compete with the larger companies, your recruiting strategies should take this into account and you may elect to target job seekers from companies similar to your size and industry.

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• Another major reason for developing compensation strategies is to encourage employee retention. Establishing a compensation program that rewards employees for their seniority in the company can promote loyalty and longevity, however other rewards should also be included that are tied to employee performance and results. 

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• Developing a rewards system such as a bonus plan tied to individual employee performance or to company performance will add value to your compensation program and can increase employee productivity and profitability.