Compensation 101: Introduction to Compensation for a Small Business Owner

(In preparation of this article, materials were used from publications and official Web site of WorldatWork, the organization of Compensation Professionals.)

Compensation is one of the strongest tools used to build business prosperity, and not just a calculation of cost associated with it. It takes a short time to gain knowledge of basic Compensation terminology and understanding its fundamental rules. It takes years of experience and much deeper knowledge to be able to develop, implement and administer successful compensation policies and programs.

Use compensation professionals to evaluate your business needs and develop compensation programs supporting your business. Compensation professionals will also help you to set up processes to maintain these programs in an efficient way. Choose Administaff to be your compensation professional.

Equip yourself with the knowledge of Compensation essentials and you will get a clear understanding of the main compensation processes and results. Start building from the foundation. Learn basics first. Compensation Philosophy & Compensation Strategy are the compensation basics.

Compensation Philosophy & Compensation Strategy
Compensation Philosophy ensures that compensation programs support the organization’s culture.

What is the compensation philosophy of your business? Defining compensation philosophy take into consideration a stage of the Life Cycle your company currently is, determine your company present and future goals and allocate funds available for compensation needs. Have a clear understanding of how a pay in your company will relate to the pay in similar companies in the market. Will it exceed the market level or lag it? Compensation professional will be able to help you answer these questions and develop a compensation philosophy for your business.

Next step is developing a compensation strategy.

Compensation Strategy includes the principles that guide the design, implementation and administration of compensation programs in organization. Compensation Strategy usually specifies what programs will be used and how they will be administered. For instance, it may give an outline of the Merit Program, Incentive Program, Bonus program, etc.

Compensation Philosophy & Strategy helps to spend companies’ compensation dollars attracting right candidates, motivating employees to focus on achieving important goals and foster high performance.

Moving forward set up a plan of development and implementation of new or enhancing existing compensation programs and plans of your company.

Total Rewards
Why do employees choose to work for a particular employer? Why do they leave? These questions may be already a focal point of your attention. Total rewards are often the answer.

The Total Rewards are the monetary and non-monetary returns provided to employees in exchange for their time, talents, efforts and results.

There are five elements of Total Rewards: compensation, benefits, work-life programs, performance and recognition, development and career opportunities.

Total Rewards Strategy is the art of combining these elements into well tailored packages designed to achieve goals of specific company. An effective Total Rewards Strategy results in satisfied, engaged and productive employees, who in return create desired business performance and results.

The most successful companies have realized that they must take a Total Rewards approach, emphasizing attraction, motivation and retention; and must include all the elements of total rewards to excel in business.

Make the Total Rewards a compensation strategy of your company’s choice and it will help you to attract the right kind of talent, motivate employees to achieve the highest performance and help to keep the most valued in the organization contributors to the company’s success.

A compensation philosophy ensures that compensation programs support your business environment and culture. A compensation strategy refers to program components and how they are administered.