Compensation strategies

Compensation strategies are one of the most important aspects of work. A satisfied employee is a loyal employee. Compensation strategies play a vital role in keeping or forsaking employees. Many organizations base their compensation strategies on substance rather than just financial reward. An organization’s pay rate may just be on par with that of the market, but it could be offering many other benefits that could more than compensate for the not-so-high salary.

Two differing packages

Let us examine two scenarios of different compensation strategies: Company A is paying as highly as the market rates each position commands. It pays no other “extras” such as bonus, incentives, share options and other such benefits. Its compensation strategies could be about bare body as one could imagine: only pay and minimal extras. However, Company A has put in place an employee policy that is difficult to match.

It offers day care for employees’ children, permits employees, especially mothers, to work from home during flexible and convenient working hours, enables subsidized education for children of employees, offers leased accommodation by which employees need not have to worry about paying hefty rents for their homes, offers free lunch at select hotels for families on particular days of the week, and discourages employees to work beyond office hours, so that they could concentrate on family work. These qualify for sound compensation strategies.

Less benefits, more pay

Company B adapts different compensation strategies. Its pay is in excess of what the rest of the market pays. However, it does not concentrate too much on family-oriented programs, but offers other benefits –in limited measure –like stock options and facilities such as transportation.

These are typical, contradictory scenarios where compensation strategies are worked out.

Based on organizational values

There is no fixed rule for how companies should keep compensation strategies in place. It is entirely up to the management to decide what suits them and the employees best. However, compensation strategies have to necessarily include something more than just the pay, or else they would be called just pay packages. Most companies decide what is best for them based on their policies and what they want to give their employees. The policy that works best is one that helps to retain good employees.



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4 thoughts on “Compensation strategies

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