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<aside> 💭 Compensation Philosophy
The compensation philosophy is somewhat similar to a company mission statement with a focus on compensation.
It’s supposed to answer two main questions:
Ultimately it will detail your convictions and expectations on pay, benefits, rewards, or recognition, and set the foundations of your internal policies.
It should be part of your company culture, as a reflection of your company values.
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<aside> 📖 Compensation policies
Policies will be the concrete application of your philosophy: it should cascade from it, getting into more details about your market positioning, the criteria you want to use and leverage, the rules you are setting at a given time.
Eventually, it should become:
You might already know a lot about the why and how of a compensation policy, but are looking for some more practical support while building it, then feel free to jump straight down to our very own template and resources.
💕 Position yourself as a competitive and engaging employer on the market
→ It helps attract the best talents for you, as a clear reflection of your culture and values
→ It increases retention by enforcing pay equity and secures your team with detailed and well-thought infrastructure when discussing a touchy and emotional topic
🆘 Improve employees and People team & managers’ experiences
→ Guides people teams and managers through all processes involving compensation decisions: hiring, promoting, rewarding talents
→ Supports your organization in case of crises or market changes: policies will evolve, and following the philosophy without having to rethink everything will for sure make it easier when the time comes
It’s never too early to define your compensation philosophy!
Every company can benefit from it. It will push you to take a step back and formalize what you want to promote, why, and how it is a really important part of your company culture.
“93% of job seekers say that salary is the most important factor when reading a job ad!” (ie. Otta blog article) You can imagine that this number is not decreasing that much once they have joined your company!
Compensation is an emotional topic to bring up with any human being, hence the more you will clarify and explain your position as a company, the easier it will be to discuss it objectively, and the less it will be a concern for your team members who will be able to focus on more relevant topics!
As for company policies, they will most likely come later on, and more importantly, it will evolve over time, as the organization changes and internal processes evolve. It’s an iterative process, you’ll have to set it once, experience it, reassess, and improve, on a very regular basis.
A standard iteration would be over one year, but given the very intense market we’re in today (inflation, remote works, pandemics, etc.), you probably want to reassess at least some criteria of your policy once every 6 months.
Some signs that you need to invest in a compensation policy could be: