Prioritizing Employees: Creating an Informed, Responsible Compensation Plan


Compensation decisions are critical ones. A small misstep and the organization may lose valuable talent. Here, Ian White, founder and CEO, ChartHop, discusses how people analytics technology enables organizations to establish a compensation plan by leveraging People data to create an informed and responsible salary model.

Compensation decisions are among the most critical decisions a manager makes. Getting them wrong may lead to the loss of top performers, reduced morale, or even discrimination. 

When you compare employees in similar roles across many companies, over 45%Opens a new window of employees think they are paid unfairly, according to a study by This unfavorable perception, and sometimes reality, pushes employees to leave their organizations. 

To make compensation decisions that benefit both organizations and their people, managers need easily accessible and understandable data, context, and history. People analytics technology enables organizations to establish a compensation plan leveraging all their People data to create an informed and responsible salary model, which helps maintain equitable workplace culture.

Benefits of an Informed, Responsible Compensation Strategy

Before building an informed, responsible compensation plan, organizations should understand the benefits a plan offers. 

  • It helps organizations allocate resources for employee benefits and compensation. Without a plan, teams can overspend or overpromise to employees.
  • It retains top talent by focusing on more than just competitive pay. Benefits, perks, and equity carry weight too. The most requested perks include health insurance, paid time off, and a retirement savings plan. Incorporating elements beyond salary into a compensation strategy builds transparency, trust, and morale among employees, increasing their chances of staying at an organization long-term. 
  • It motivates employees by providing a roadmap for career progression. Tying compensation to job performance incentivizes employees to perform better. For example, linking a financial bonus to a specific sales goal motivates sales teams to work harder to achieve that goal. 
  • It drives referrals. A strong compensation strategy makes employees feel valued and supported, increasing the likelihood they will recommend open positions to people within their networks.

With millions of job openings, companies need these benefits to remain competitive and dissuade their employees from leaving. Companies can get those benefits by building an informed, responsible compensation plan. 

Informed Compensation Planning

To create an informed compensation strategy, managers should use a modern people analytics platform rather than time-consuming spreadsheets to access essential data and make informed decisions about:

  • The employees eligible for promotions or raises
  • Specific compensation bands for each employee.
  • Promotion and raise history. 

A people analytics platform also helps organizations uncover and address data trends within a compensation strategy. When they begin reviewing collected data, leaders should ask whether:

  • A particular team or group earns promotions more frequently than the rest?
  • Two people at the same level in the same role earn vastly different salaries?
  • Specific teams or employees constantly earn bonuses while others struggle to meet key performance indicators (KPIs).

By analyzing those data trends, organizations can evaluate existing processes and create a more positive employee experience. In fact, positive employee experiences lead to stronger employee engagement and generate more profitability. 

See More: 5 Experts on HR Technologies Transforming the Employee Experience

Responsible Compensation Planning

Creating an informed compensation plan is just part of the equation. The other part? Responsibility. A responsible compensation plan:

  • Includes future headcount planning
  • Defines an organization’s compensation range, and
  • Ensures fairness, equitability, and objectivity across all pay decisions

A responsible compensation plan also requires data, specifically performance and market data. A people analytics platform helps stakeholders regularly measure and track employee performance and supplement it with market data for benchmarking.

Performance data, like feedback from 1:1 evaluations or production output, allows organizations to identify star performers, while market data ensures pay matches new market realities. An organization should leverage this data continuously to ensure employees have the same pay across job levels, irrespective of gender or other factors unrelated to the roles. 

Creating transparent guidelines for an organization’s compensation strategy, like when to offer raises and promotions, also streamlines the entire process. Employees should have easy access to these guidelines to increase transparency and reduce confusion. 

Finally, HR and finance should partner for plan development, review and adjustment, collaborating to assign team budgets, and using headcount planning capabilities to forecast and share numbers. 

Effectively Communicating a Compensation Plan

Once an organization establishes an informed, responsible compensation plan, leaders must effectively communicate the plan to employees so they know the following:

  • Their eligibility for a raise.
  • The range of their raise. 
  • How raises tie into their performance and the market.

According to a PayScale studyOpens a new window , fewer than 40% of organizations currently feel confident in their ability to explain pay decisions. Part of the problem? HR managers have difficulty visualizing the compensation plan.

Every organization needs a system for visualizing, managing, and supporting its people. Technology can help centralize and manage compensation data, set up guidelines and benchmarks, and configure review cycles.

If leaders do not have the tools needed to help explain pay decisions, the perception of pay decisions may not align with what organizations pay employees. 

Employers can better control pay perception by communicating about pay more regularly, which has become increasingly important to workers. In fact, according to the 2021 Gartner Employee Perception of Pay Decisions Survey, 45%Opens a new window of employees want to receive communications about pay at least once a month, but only a third actually do. 

People form the foundation of a robust company. Organizations must reaffirm their commitment to taking care of their workforce. Embracing an informed and responsible compensation strategy motivates an entire organization to perform strongly and prevents top talent from walking out the door.

How are you creating an informed, responsible compensation plan in your organization? Let us know on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .

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