How to Tackle Informed, Responsible Compensation Planning

Nov 2, 2023
Reading time: 9 min

The best compensation plans benefit everyone: People receive compensation that is fair and equitable, which helps maintain a positive workplace culture, and your organization has a sustainable budget, AKA no last-minute surprises.

But how do you get there? Read below to discover more benefits to establishing an informed, responsible compensation plan and how to start building one today.

4 Benefits to Creating an Informed, Responsible Compensation Plan

Before diving into how to build an informed, responsible compensation plan, it’s important to know the why behind it.

  • It aids proper budget allocation and planning. Compensation planning will help your organization properly allocate resources for employee compensation and benefits. Without a clear plan in place, it’s easy for teams to overspend or over-promise employees and candidates (which is also why it’s important to have detailed job descriptions approved at every level).
  • It attracts and retains top talent. Remember that your compensation plan isn’t just about competitive pay. In fact, the most sought-after perks are actually flexible work schedules and remote work options. If you do your due diligence and create an informed strategy, you’ll be able to attract top talent and build a culture in which employees feel respected, increasing their chances of staying at your organization long-term.
  • It drives referrals. Having a strong compensation plan in place also drives referrals, a top contributor to talent acquisition. When your employees feel valued and supported at work, they are in turn more likely to recommend open positions to former colleagues.
  • It increases employee trust. By communicating your compensation plan, you’ll increase transparency and build trust (which is much needed, as a HBR study revealed that 58% of people trust strangers more than their own boss).

How to Create an Informed, Responsible Compensation Plan

While compensation planning isn’t a one-size-fits-all process, there are common steps you can take along the way to deliver – and sustain – a well-rounded plan. In turn, your strategy will be backed by data and will benefit both you and your people.

Informed Compensation Planning

To create an informed compensation plan, you can sift through spreadsheets filled with information like hiring dates, employee compensation, competitive pay for the current market, and raise eligibility. Or you can not do that, and instead use a people operations platform. Doing so requires you to:

Involve Your Managers

With a modern people operations platform, you can give managers access to data to help make informed decisions about employee compensation and promotions during every review period. When managers have access to the right data, they can:

  • See who is eligible for a raise or promotion
  • Determine the amount or percentage of raise
  • View the specific compensation band for each employee
  • Note the last time each individual received a raise

Making all of this information available at the click of a button empowers your leaders to make faster, data-backed decisions during compensation reviews that align to your company’s broader plan.

Look at your data performance throughout your organization

With the right access to data, your leaders will never have to spend more than a few clicks searching for info again. Everything from employment history to current progress plans are visible in ChartHop.

Consider DEIB Initiatives

Within your people operations platform you can review hiring, compensation, employee, and performance data to identify any trends or opportunities within your compensation plan.

Here are some suggestions on where to start as you begin reviewing your data:

  • Analyze who is being promoted. Does a certain team or group earn promotions more often than the rest?
  • Determine pay ranges. Do two people at the same level in the same position earn vastly different salaries?
  • Evaluate bonuses. Do certain teams or positions constantly earn bonuses, while others struggle to meet their goals? What does the support look like in each of these roles?

Analyzing this data will help you evaluate the processes you have in place and create a more positive employee experience.

Communicate Your Plan

Finally, developing an informed compensation plan also means informing your employees of it once completed. This transparency is crucial, since employees need to know if and when they are eligible for a raise, how much it could be, and the extent to which it’s tied to their performance and the market.

Responsible Compensation Planning

Creating an informed compensation plan is just one part of the equation. You also need to plan responsibly.

So what does that strategy look like? A responsible compensation plan is one that accounts for employee retention (whether that’s through competitive pay, a robust rewards system, or strong benefits) as well as future workforce planning to leave room for various changes to the team.

It also helps you ensure sustainability in your organization’s compensation range and support fair, equitable, and objective decision-making.

Interested in learning more about organizational justice?

Access our 101 guide here

To create a responsible compensation plan, you need to:

  • Measure and track performance. When it comes to business decisions, data is king. And decisions about your people – the most important aspect of your organization – need to be data-driven. Investing in a people operations platform with an employee experience function helps stakeholders at every level measure and track their performance.
  • Access market data for benchmarking. Market data not only helps you make informed decisions about your organization’s total compensation strategy, but also helps you attract top talent and prevent unintentional biases for job offers and benefits.
  • Establish transparent guidelines. Creating and communicating guidelines around your compensation plan, such as when you offer raises and promotions, helps streamline the planning process. Additionally, employees should have the ability to access this information quickly and easily to increase transparency and reduce confusion.
  • Partner with your finance team. There shouldn’t be a gap between HR and Finance, but oftentimes there is when it comes to headcount and compensation planning. To combat this, work together to assign budgets for each team and use your headcount planning capabilities within your people operations platform to forecast and share numbers.
  • Share responsibilities with your managers. Your managers have to work within budgets, so why not make them a part of the process? What’s more, sharing responsibilities with your managers creates accountability for how they distribute their team’s money to help them make the best decisions about employee compensation.
scenarios-org chart

No more “what ifs” when it comes to team planning. With ChartHop, you can visualize your headcount – within a budget – to ensure you hire the right people.

Putting Informed, Responsible Compensation Planning into Action

Knowing what to do is one thing, actually putting those ideas into action is another. The following tips from People leaders who have delivered on the goal of more informed and responsible compensation planning can help:

Define the need and gain buy-in

For Giuliana Zara, Head of People at Aper, establishing a clear compensation plan started by building career levels and salary bands. This allowed her team to have a defined approach rather than managing compensation on a role-by-role basis, which makes it difficult to plan ahead and to set expectations for employees.

Next, she communicated the need for a defined plan – and the benefits of having one – to leaders. This communication helped avoid resistance once the company rolled out the new plan and ensured that everyone from the top down was aligned on how to actually execute on the plan. As a bonus, talking to leaders also helped the People team understand each team’s needs and prioritize goals based on a budget.

Be transparent with employees

Communicating your compensation plan doesn’t just start and stop with leadership – you also need to share details with employees. This type of transparency proved essential to Karen Kuhn in her role as Senior Director of People Operations at Order. According to Karen, when people don’t have a good understanding of how their work can get them to the next level, you have a recipe for turnover.

Instead, you need to give team members clarity into what’s expected in their current role, what steps they need to take to get to the next level, and what that next role entails. Aligning those expectations to compensation can provide a transparent pathway to growth that keeps everyone at the company on the same page.

Prioritize fairness and consistency

In her role as VP of People at Truework, Devin Blase took this transparency to the next level by not only providing visibility into what’s needed to get to the next level, but also sharing pay bands for each level.

Introducing pay bands in this way ensured better equity across the organization and market competitiveness, since each band was also based on external market rates.

Start Planning Today

Now is the time to dive into your people data to create an informed, responsible compensation plan. By doing so, you’ll not only prioritize your people, but also acknowledge their experience and efforts. What’s more, your organization as a whole will benefit from your detailed strategy and thoughtful transparency.

Responsible compensation planning also requires keeping your people data and information safe. Read how 1Password – a company whose business is security – ensured their compensation plan was secure.

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