In a recent meeting with a client’s executive leadership team, I facilitated a discussion about Compensation Guiding Principles. A principle is a kind of rule, belief, or idea that guides you. They are basic truths that help you with your life and decisions.

And in the case of compensation decisions, there is often tension and a balancing of priorities that needs to happen to arrive at an outcome you can communicate with transparency and that builds trust.

It’s a good idea as an employer to write your own guiding principles so you have a compass to reference if you find yourself debating what action to take and how best to communicate the decision and why behind it.

Compensation Guiding Principles:

1. Alignment to Business Strategy & Goals: Influences compensation philosophy

2. Affordable: Impacts budget for annual increases and market/equity adjustments

3. Competitive: Percentile of the external market targeted – typically 50th

4. Equitable & Fair: Consistent use of standard pay decision making processes

5. Transparent: How openly you communicate to employees

6. Determining the value of the JOB is based on the external market and what is competitive given the pay practices of other employers balanced with internal equity.

7. Determining where to pay the EMPLOYEE in the range assigned to the job is typically based on factors like performance, tenure, work location, education, and/or experience.

Is there something on your list of principles that you would add to this list?

#compensation #rewards #hr #humanresources #payequity #paytransparency #fairpay