I am always surprised when I talk to leaders, and they don’t have an answer to this question.

Even if you don’t have a compensation philosophy that was discussed at length, written down, and approved, you have one.

It just isn’t formal.

Compliance with the pay equity and transparency laws is more difficult if you don’t have one.

Communicating about pay will be more of a struggle if you don’t have one.

Your HR and Compensation team members will choose a compensation philosophy in the absence of direction and input from senior leaders.

You must anchor your base salary ranges and target incentives to something in the external market.

According to a 2023 survey by Deloitte and WorldatWork, 91% of responding organizations anchor their pay grade midpoints to the 50th percentile of the market. This is a decrease from 96% in 2019.

If you anchor below or above the 50th percentile, tell me why below.

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