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“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” -Sun Tzu
Compensation plans are essential for nearly every enterprise. By crafting a comprehensive plan with competitive benefits, employers can attract better talent and boost morale. Compensation plans detail salaries, raise schedules, fringe benefits, union perks, employer-provided vendor discounts, and details about bonuses, incentives and commissions for employees.
How do you develop and implement a compensation program?
Salary, commissions, and bonuses are known as direct compensation. Indirect compensation includes benefits and equity-based programs. Any plan must take into account both exempt and nonexempt workers — the latter being entitled to overtime when they meet certain thresholds. Sales staff may be paid partly or entirely by commission. Besides the basics of pay and essential benefits, a strategically designed compensation plan includes incentives to motivate your workforce to meet sales targets.
According to the Society for Human Resource Management, maintaining a dynamic and strategic compensation program has three main purposes:
A compensation plan is more than just a document. It’s a reflection of company culture, and outlines how employees will be rewarded. A solid plan requires consistency, but also some level of flexibility to reflect changing market conditions. If there’s a shortage of skilled workers, you may need to adjust compensation rates to find the right candidates.
Ensure your compensation plan is fair for all employees, compliant with state and federal laws and regulations, and fiscally sensitive. Foster a culture of transparency and trust, and make sure your rewards strategy aligns with your business goals.
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