Your company's compensation plan is a complete package that details the terms of employee payment. It's one of the most important aspects of running your business, as it attracts and retains top talent within your industry. More importantly, it allows for predictable and consistent budgeting.

Taking time to create the best compensation plan design is crucial. So, how do you structure one?

How to Develop a Compensation Plan

Before you do anything, it's a good idea to create an outline that sets a company objective. Start with creating job descriptions and setting a budget that you can use for guidance.

Next, you should figure out what your company will prioritize. Will your organization be a leader in direct compensation, or will it offer excellent benefits?

Once you have your compensation philosophy figured out, you can start ranking jobs. Many compensation managers will use a matrix to organize pay structures and any accompanying tiers. Develop grades for seniority, making the difference between entry-level positions and advanced positions clear. Your compensation plan will likely serve as a guide for career advancement as well.

Lastly, settle on salaries and hourly rates. Assign positions within the matrix you created in the appropriate salary range. You can use the budgetary information, classifications, and grades for guidance.

What to Include

There are many different components to compensation plan design. The two most important, however, are direct and indirect compensation. Get the best compensation plan design by visiting this website.

What is Direct Compensation

Direct compensation includes the core monetary pay. Within this category, you'll find several styles of payment. Usually, employers will stick with one per job category. You can choose to provide a yearly salary, hourly pay, or commission based on performance.

Bonus pay is also part of the direct compensation category. It includes additional pay incentives that go beyond hourly pay or salary.

What is Indirect Compensation

Indirect compensation is all of the fringe benefits you might offer. It's all the non-monetary payment that adds tons of value to the plan. Some benefits that fall into the indirect compensation category include:

• Paid holidays
• Disability income protection
• Health insurance
• Employee retirement programs
• 401K plans
• Student loan assistance
• Company equipment
• Childcare expenses

Creating a Competitive Compensation Plan

If there's one thing to spend extra time and resources developing, it's your compensation plan. The package can have a far-reaching impact on your workforce and help you retain a solid team for as long as possible.

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