HR Support on Compensation Planning & Management

Editor's Note: Plan a compensation system that promotes marketplace competitiveness.

Marta MoakleyOverview: One of the greatest reasons for employee turnover concerns actual or perceived disparity between an employer's compensation system and the average compensation available within the marketplace. Accordingly, compensation is an essential component of an effective retention strategy and employers need to design compensation systems that make them "employers of choice" regarding their particular total rewards packages.

Compensation planning includes the consideration of the following components of a total rewards system: base salary; bonus percentage; merit increases; stock awards; defined contribution pension; 401(k) plan matching and vesting; paid time off or vacation policies; and available insurance coverage and employer payments. In addition, certain policies and practices may be very attractive to workers, including flexible work arrangements or alternate work schedules.

Using a compensation benchmark service may allow an employer to better assess their competitiveness in the labor marketplace.

Trends: Recently, the Office of Federal Contract Compliance Programs (OFCCP) has been very active in its enforcement initiatives regarding compensation disparities within organizations. Federal contractors should be mindful of their recordkeeping and reporting obligations in the event of an OFCCP audit.

Author: Marta Moakley, JD, Legal Editor

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HR guidance on the importance of proper compensation planning and designing effective compensation systems.