Developing a Compensation Plan

Dear friends we already learned a lot about compensation management . Now we will  learn how to develop and set up a new Compensation plan in any organization. No matter which type of organization or establishment you are dealing with, every organization have to follow the following steps to establish a new compensation plan:

 1. Develop program outline

  • At first have to set an objective for the compensation program identifying the needs.
  • Establish target dated for implementation and completion
  • Determine a budget for the plan

2. Oversee and design compensation program

  • Determine whether this position will be impermanent or temporary
  • Determine the cost of going outside versus looking inside
  • Discuss with managers
  • Discuss with employees
  • Do personnel audits
  • Consider impact on other human resources programs

3. Develop a compensation philosophy

  • Form a compensation committee
  • Decide what, if any, differences should exist in pay structure for executives, professionals, sales employees and so on.(wage, salary, incentives)
  • Determine whether the company should set salaries at, above, or below market
  • Decide the extent to which employee benefits should replace or supplement cash compensation.

4. Conduct a job analysis of all positions

  • Determine the task or the job function  to be accomplished by different professionals
  • Classify the job depending on exempted and non exempted
  • Develop model job descriptions for exempt or non exempt position
  • Develop final drafts of job description and review it by department managers
  • Finalize and document all job descriptions

5. Evaluate job

  • Rank the jobs between and among departments and verify the ranking comparing it to industry market
  • Prepare and develop a matrix organizational review and compare it with both the company structure and the industry wide market
  • Prepare flow charts of all ranks for each department
  • Present data and charts to the compensation committee for review and adjustment.

6. Determine Grades

  • Establish  the number of levels senior, junior, intermediate and beginner for each job family and  assign a grade to each level
  • Determine the number of pay grades, or monetary range of a position at a particular level, within each department

7. Establish grade pricing and salary range

  • Establish benchmark jobs
  • Review the market price of benchmark jobs within the industry

8. Determine  an appropriate salary structure

  • Determine the difference between each salary step
  • Determine a minimum and a maximum percent spread
  • Review the job descriptions and slot the jobs.
  • Review and approve the salary structure by the compensation committee

9. Develop a salary administration policy

  • Develop and document the specific company policies for selected group
  • Develop and document a strategy for merit  raises and other pay increases
  • Justify the policies and strategy
  • Review, adjustment and approve it by the compensation committee

10. Obtain top executives approval of salary program

  • Present data to the top-level executives (senior managers and officers) for review and approve.

11.Communicate the final program to employees and managers

  • Present the plan to executive staff managers for approval or change and incorporate necessary changes by making presentation
  • Communicate the new program to employees using sideshows or handouts
  • Incorporate the plan with HRIS so that senior can get the accurate report of the program
  • Execute the program

12. Monitor the program

  • Monitor feedback from manager
  • Make changes where necessary
  • Find flaws in the program and adjust or modify where necessary.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s