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Developing a Total Compensation Philosophy

February 15, 2015  |   Compensation,Uncategorized   |     |   Comments Off on Developing a Total Compensation Philosophy

Why develop a Total Compensation Philosophy?

– It provides a way to determine and assess the company’s Total Compensation program objectives and guiding principles.

– It addresses how the organization wants to approach all the elements of Total Compensation, and provides an ongoing strategic framework in which to evaluate future design and cost considerations.

What are the Key Elements of a well-designed Total Compensation Philosophy?

The Questions that Need to Be Addressed Are as Follows:

How much total compensation should be in pay versus benefits?

– Should benefits or cash compensation be the primary focus?

– What’s the optimum balance?

How should your company’s Total Compensation Program compare to those of other companies?

– What is your company’s competitive universe for talent? For product?

– Where should your company target base salary bands?

a) Around the median or 50th percentile of the market? Above the median?
b) Should this be the same for all job categories and levels?

– Should your company’s total cash compensation be targeted above the median of the market if certain performance objectives are achieved?

– Should your company target total cash compensation at different levels based on position levels (e.g., executive@75th percentile; managers@60th; all others @50th)?

Linking to the Business

– What do you know about your company’s business plan, culture and approach to total rewards that might impact how your company moves forward with the development of a compensation philosophy?

– How does the business strategy for your company impact its compensation program in terms of the value proposition to the company and employees?

– What is the financial commitment to the compensation program and what issues should you be aware of in terms of cost and affordability?

What should the compensation program achieve?

– What are your top five (5) objectives for the compensation program (e.g., marketplace competitiveness, greater opportunity to increase pay based on performance, more opportunity to reward employees, affordability, organization, etc.)?

– What are the drivers for increased pay at your company?

– What do you think drives employee engagement at your company?

– What does your company want to give to and get from its employees?

– What do today’s employees want from your company and what will they give back in return?

– Considering different working generations, would you motivate and reward them differently? Why or why not?

– How do you assess your employees and determine who are truly the top performers?

– What types of special recognition and reward programs should be in place?

– Do you have any feedback from employees on how they perceive and value the current compensation program?

– Are there any sacred cows when it comes to the compensation program?


We hope that the recommendations above are helpful to your organization in establishing the right compensation philosophy. BCR has vast experience in helping clients in designing, developing, implementing, and communicating both domestic and global compensation programs and structures. Please reach out to us should you want to explore how we can assist your organization further.

Written by: Barb Manny, BCR President and Consultant

BCR is a local, minority-owned firm with more than 25 years experience in serving non-profit, public, and privately held entities in the key areas of Benefits and Compensation Consulting, Performance Management, Human Resource Organization Development, and Human Resource Information Systems and Processes.

Call (847) 236-1208 or email us today for a no-cost, no-obligation consultation to discuss how we can partner to achieve rewarding results.


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