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Compensation Philosophy
Updated over 11 months ago

Compensation Philosophy allows you to define and manage your company's compensation strategies. Defining your Compensation Philosophy will provide you with valuable insights that will assist you in making decisions regarding talent retention and competitive positioning.

By creating a Compensation Philosophy you can:
1. Define target percentiles across different regions (sites/pay zones) and departments.

2. Find out the pay gap between your employees actual compensation and your target percentile.

3. Have your compa-ratio calculated and compared against your target percentile (by default, if no target percentile is defined, the compa-ratio is calculated against the market salary range median).

Watch this short video to learn how to create a Compensation Philosophy:

FAQ

Which user permissions do I need to create a Compensation Philosophy?
Only Admins and users that are allowed to update data.

How Can I edit my sites/pay zones?
Via Settings > Site Mapping , you can find more information in our Pay Zone & Site Mapping article.

What if I don’t know what target percentile to set? How do I decide?
Deciding on a target percentile for compensation involves balancing several key factors:

  1. Industry and Competitor Benchmarks: Understand what similar roles are paid in the industry and by competitors. Use Compete’s benchmark role search to do your research.

  2. Financial Health and Budget: Ensure the target percentile aligns with the company's financial capabilities and budget constraints.

  3. Talent Management Objectives: Consider the company's goals for attracting and retaining top talent.

  4. Alignment with Compensation Philosophy: The target percentile should reflect the company's overall approach to rewarding and valuing employees.

  5. Geographical and Role-Specific Variations: Take into account regional cost of living and the demands of specific job roles.

  6. Legal Compliance and Equity: Ensure adherence to legal requirements and promote internal fairness.

  7. Regular Review and Adaptation: Continuously assess and adjust the target percentile in response to market and organizational changes.

This approach ensures a balanced, strategic, and sustainable compensation strategy that aligns with the company's goals and market conditions.

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