Audit Questionnaire of Compensation and Benefits

7/28/2019 Audit Questionnaire of Compensation and Benefits

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Audit questionnaire of compensation and benefits

1. How is the compensation program and total compensation package communicated to

employees?

2. What are the cultural issues or beliefs related to compensation in your organization?

3. What is the eligibility requirement for vacation?

4. Is there a cap to limit the amount of vacation accrued?

5. Are employees permitted to substitute sick leave for vacation?

6. How is unused accrued vacation treated?

7. Can employees contribute sick leave to other employees, and if so, what are the limits?

8. How is employee communication regarding compensation and benefits delivered in your

organization?

9. Describe the health insurance program provided by your organization?

10. Are dependents covered, and if so, in part or in full?

11. Are domestic partners covered?

12. What are the eligibility requirements for health insurance and other benefits?

13. requirements for coverage?

Dental

Vision

Disability

Employee Assistance Program

Life Insurance

Other wellness benefits

Flex benefit plan

Other benefits

14. What is the pension or retirement plan?

15. What is the vesting period?

16. Can employees contribute?

17. Can pretax dollars be put into some form of deferment plan?

18. What holidays are paid and who is eligible for them?

19. What is the vacation schedule, and how is it earned?


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20. Is there a formal compensation program?

21. How are wages set?

22. Are formal salary ranges set?

23. If formal salary ranges are set, are they made public to employees?

24. How are jobs rated?

25. How frequently are jobs re-evaluated or updated?

26. Are any salary surveys used? If so, which ones?

27. Are pay ranges revised as a result of these surveys? How frequently?

28. Who in your organization (what position) administers the compensation program?

29. Are merit increases given, and if so, are they integrated with performance evaluation?

30. Is there a bonus system, and if so how is it structured?


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Compensation andBenefitsThe compensation and benefits processes belong to mostimportant HR Processes, which are critical for the

organization and modern HR organization. The compensation

and benefits is about managing the personnel expenses

budget, setting the performance standards, setting the

transparent compensation policies and introducing the

competitive benefits for employees. The organization with

effective compensation and benefits drives its personnel

costs, manages the performance of employees and rewards

the extraordinary performance.

Compensation and Benefits Role

The compensation and benefits processes introduce thetransparency into Human Resources and rewarding employees forthe achieved performance. The compensation and benefits provides

the managers with the compensation tools to build a differenceamong employees as the high performance corporate culture can be

built in the organization.

The compensation and benefits department monitors the external

job market and optimizes the personnel expenses budget of the

organization. The compensation and benefits defines the

compensation strategy, sets the transparent and simple

compensation policy and defines the general rules for the

extraordinary payments, bonus schemes applied in the organization

and introduces general other compensation policies like the


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Relocation Policy, Short-Term Assignment Policies, Benefit Car

Policies and other.

Compensation and BenefitsResponsibilities

The compensation and benefits department is usually responsible

for the transparency in the compensation practices in theorganization and keeping the internal fairness of the total cash. The

compensation and benefits has to supervise the development of new

compensation components and keeping the general rules for the

design of the compensation component.

The compensation and benefits department is responsible for the

personnel expenses budget of the organization. The compensation

and benefits department sets the standards for the individual salary

increase, the mass salary review and the rules for the bonus payout

as the organization keeps the financial stability and the planned

personnel expenses budget is kept.

The compensation and benefits department has special processes to

monitor the external job market as it can set the right compensationpolicy, which is compliant with the approved compensation strategy.The compensation and benefits department is responsible for the

extensive monitoring of the market and designing the new

compensation components inspired by the HR Best Practices in the

compensation area.

The compensation and benefits department is always closely

attached to the development of the new compensation components,which support the performance and effectivity of the organization. It

co-operates with the different business units and it aligns their

requests into the general rules for the compensation components,

which are transparent and fair.


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The compensation and benefits designs new adjustments to the

compensation strategy and the compensation policy as theorganization does not lose its competitive advantage on the job

market.

Compensation and Benefits Content

Compensation Strategyo Compensation Strategy Key Contento Pay Market Strategic Position Settingo Compensation Consultants and Compensation Strategyo Compensation Strategy building Competitive Advantageo Why is compensation strategy important? Compensation Policy Executive Compensationo Executive Compensation Plans Salary Surveys Sales Incentives Compensation Plans

Compensation StrategyKey ContentThe compensation strategy is the underlying strategy for thegeneral HR Strategy and its main role is to support the

implementation of the HR Strategy and building the

competitive and effective organization with the high

performance corporate culture. The compensation strategy
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does not explain the detail of the compensation scheme and

the details of the individual compensation components, but it

sets the general guidelines for the compensation components

and sets the priorities to be implemented over the period of

the HR Strategy implementation.

The high performance corporate culture and the high performanceHuman Resources organization have to be supported by the

compensation strategy, which is designed to be business driven

strategy and with the right compensation tools, which motivate

employees to go the extra mile and rewarding the real successes.

Main Compensation Goals

The compensation strategy has to set the main compensation goalsof the organization and they have to be kept as the main target for

Human Resources to be achieved. The compensation goals have to

be set in accordance with the business strategy and they have to

visible in the HR Strategy.

The top management and Human Resources have to decide, what

the goals are of the compensation schemes in the organization. The

compensation goals should be aligned with the corporate culture

and the general long-term expectations of the employees, when the

organization does not implement a huge change in the corporate

culture.

Main compensation goal is about the role of the compensation in

the organization. Each organization pay salaries, but the role of the

compensation has to be balanced with the other aspects of the

overall motivation scheme applied in the organization. The

organization has to choose to pay higher salaries and offer less

development or career opportunities or it can offer lower salaries


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and better career opportunities to keep the motivation system

balanced.

When the organization defines its basic compensation goals, it can

continue with structuring the main compensation decisions

formulated in the compensation strategy.

Main Strategic CompensationDecisions

The compensation strategy allows smooth and efficient operation ofother HR Processes like the recruitment and staffing, performance

management, proper KPI and goal setting process, performance

appraisals. As the other HR Processes can run smoothly and they are

not blocked by the wrongly set compensation strategy, the main

compensation decisions have to be included in the compensation

strategy and the top management and Human Resources have to be

aligned in the understanding to the main compensation decisions.

Role of Compensation in Human Resources

The compensation is a part of the complex HR processes, policies

and procedures. The top management and Human Resources have

to decide, what will be the primary role of compensation in the

organization. Some organizations prefer the supplementary role of

the compensation and other organizations prefer the dominant role

of the compensation.

This compensation decision is extremely important as it sets the

general framework for the compensation components, if they will

exist in the organization or they will be the part of the other HR

policy.

The compensation strategy has definitely include the description of

the role of the compensation in the organization.


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Competitiveness

The competitiveness of the compensation is another important

compensation decision. The organization can decide to be

aggressive with the compensation strategy and it can set the

aggressive position on the pay market, but this strategy is extremely

expensive for the organization and it has to balance it with high

margin on the products and services.

On the other hand, the organization can choose to offer the career

and development opportunities, it can increase the responsibilities

of the individual employees and it can balance aim to the lower levelof the compensation on the pay market.

The decision about the competitiveness of the compensation

strategy is extremely important as it has a huge impact on the costs

of the organization and it requests the right setting of other HR

Processes.

Internal Structures

The organization does not have to follow the same pay market and

the same level for all the job positions. It is extremely important

compensation decision to be included in the compensation strategy.

The organization can decide about making huge pay differences

across different units or it can decide about the different pay level

for the experts and managers as it protects the know how.

Administration

The administration is a tough compensation decision in the

compensation strategy as it sets the roles and responsibilities of

Human Resources, managers, top managers in the compensation

processes.


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The organization can decide about preferring the decentralized

compensation model, when the manager decides most issues and

pay increases, but Human Resources is in a danger of not keeping

the total personnel expenses budget.

In the centralized compensation strategy, the HR Managers are the

main decision makers and the employees and managers do not feel

the comfort of the free decision.

Pay Market StrategicPosition SettingThe right position on the pay market is a key to successfulcompensation and benefits function in the organization.

Setting the right position enables other HR Processes with

value added to work and it supports the recruitment, staffing,

retention and talent management. The right position on the

pay market allows the organization to allocate the personnel

costs efficiently and to keep the organization competitive.

When the organization sets the strategic position on the pay market,it has to evaluate several basic questions, which help to set the

target position correctly. The decision is not formal as it forms other

compensation and benefits processes, has a huge impact on the

allocation of the personnel costs and limits the potential for quick

changes in the compensation schemes used in the organization.


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The main questions to be answered are:

1. What do we want to achieve by setting the strategic position on the pay market?2. Who are my competitors?3. What reactions will we see to follow from the competitors?4. How many strategic positions do we need?5. What are the costs of the setting the strategic position on the pay market?

Why to set the strategic position on

the pay market?

The modern organizations and modern and effective Human

Resources Management are based on setting the competitive

advantages. The right and efficient compensation strategy is a

definitely the competitive advantage and it cannot work without the

strategic position on the pay market.

The modern organizations are based on the talent management,

offering the career opportunities and having other HR Processes to

prolong the length of employment of the key employees and key job

positions. The strategic positioning on the pay market allows theother processes to function properly and keeps the organization

healthy.

The recruitment strategy cannot work without the adequate

compensation strategy as it can easily miss the goals. The company

can target the best potentials on the job market, but the salary

offered has to be adequate to the qualities of the candidates.

Knowing your competitors on the pay

market

The organization always knows its competitors in products and

services. But the organization has to know and understand the

competitors in Human Resources as well. They can be different. But

employees can see the competition on the job market differently.


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Knowing the competitors on the job market is extremely important

for Human Resources. HR Recruiters have to analyze, which

companies are sourcing the organization and the HR Front Office

has to monitor, what companies hire new employees from theorganization.

The compensation strategy has to be set as the organization can

compete with the competitors on the pay market and the

compensation strategy has to be inspired by their compensation

strategies. The employees from the competitors working for the

organization are usually open to help and they can provide the

excellent information, which can save many discussions in

determining the right compensation strategy.

Predicting the reaction of thecompetitors

It is extremely important to have several scenarios describing the

reactions of the competitors. When you are the market maker andyou change your compensation strategy, you can expect all the

competitors will react and you can start costly war on the job

market. When you are a niche player and you hire several employees

per year from your competitors, they will not react.

In case, you hire just the experts, you can expect, the initiatives to

protect the experts and key employees will evolve at your

competitors and the price of hiring the expert from the competitor

will rise.

One or more pay market strategicpositions

Human Resources has to decide, whether it will use just onestrategic pay market position for the whole organization or it will


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identify groups of specific job positions, which will be evaluated and

positioned on the pay market differently.

The general pay market position is simple, it is easy to explain, the

organization uses just one, but the organization loses the flexibility

in the setting of the compensation strategy and this can lead to

many exceptions in the compensation policy as the key groups of

employees are not protected by the compensation policy in general

and the managers will ask for the increased protection by using the

exceptions.

The general pay market position can be more expensive than more

pay market positions as the system tends to set the system to

protect the key employees and the key job positions and the rest of

the populations benefits from it.

The costs of setting the strategic paymarket position

Money is driving the compensation strategy. Each proposal forsetting the strategic pay market position has to be carefully

calculated, analyzed and Human Resources has to prepare the

predictions and forecasts of the future development.

Setting the strategic pay market position without the proper analysis

and calculation is just a hazard with the future of Human Resources

in the organization as the top management can be amazed, how

expensive the strategic pay market position is.


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CompensationConsultants andCompensation StrategyThe compensation strategy design and development is toodifficult to accomplish purely internally. The compensation

and benefits team is usually asked for the external

benchmarks and the common practice on the market and the

compensation consultants can be a huge help, when the HRteam is able to manage their deliverables.

The compensation consultants are expensive and HR has to have a

clear goal for the compensation consultant to be achieved. The

compensation consultant is always able to bring the creative andinnovative compensation solution, when the goal is not given. Theorganization has to pay for the services, which are not utilized. With

the clear goal, the compensation consultant has a clear navigation

tool and forces the effort to reach the defined vision.

Compensation Consultants Benefits or

Value Added

The compensation consultants bring the huge external know how in

the compensation and benefits area, the previous experience and

the experience with different solutions of the issues in the

compensation schemes.The compensation consultant should provide the advice on the

strategic position of the compensation strategy on the pay market


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and to provide the information about the best practices in the

compensation and benefits area. The compensation consultant

should never decide about the final compensation strategy, but can

provide the useful feedback and advice in the process of designingthe compensation strategy.

The excellent compensation consultant always asks the clients

about the feedback and how the solutions work in practice to have

the experience to build on. The compensation consultant can see a

new creative solution in one company, which can help to build the

HR competitive advantage in another organization. The

compensation consultant can help to design the state-of-the-artcompensation strategy and can save huge costs to the organizationin the future.

How to use CompensationConsultants

The organization should invite the external compensationconsultant at the right moment. The organization cannot leave the

compensation consultant to set the whole compensation strategy.

The organization has to set the clear goals for the compensation

consultant and it should use the deliverables of the compensation

consultant in the following decision process.

Without strict goals, the organization cannot manage the

compensation consultant and it cannot use the best know how of

the compensation consultant. The consultant has a deep knowledge

of the compensation pay market and has know how about the

compensation best practices and these should be used for building

the competitive advantage, but the organization has to keep the

final decision about the design of the compensation strategy.


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Compensation Consultants

Deliverables

The organization has to define the deliverables, which support theorganization in its decision process. The deliverable of the

compensation consultant can be easily the content of the

discussions with the executive top management as the consultant

has a broad knowledge of the pay market and the top executives

likes the discussions about the general market and the best pay

practices in the industry.

The common deliverables of the compensation consultant are about

the comparison of the proposal from Human Resources with the

best practices available and the comparison with the real pay data.

The consultant usually has the access to the detailed salary data and

is able to make a comparison and to point out the key components

and key jobs to be included in the compensation strategy as the

jobs building the competitive advantage.

Compensation Strategybuilding CompetitiveAdvantageThe competitive advantage is a necessary component for themodern organization. The competitive advantage has to be in

products, services, internal and external processes and in


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Human Resources Management. The employees are the

assets of the organization and the competitive advantage in

Human Resources Policies can generate a huge impact into

the net profits and overall performance and profitability of

the organization. The competitive advantage incompensation area usually generates a huge portion of theoverall competitive advantage in HR Management.

What is competitive advantage in

compensation?The competitive advantage in the compensation area is not aboutbeating the pay market by paying higher salaries and bonuses to all

employees. The managers tend to think, the better the pay of

employees, the more competitive the organization is. It is not true,

the organization has to carry the higher personnel expenses and

during the crisis or the recession, it can be a huge competitive

disadvantage in the compensation and the compensation strategy

has to be redesigned quickly as the organization can continue in its

operation and it has a destroying influence on the overall employee

satisfaction.

The competitive advantage can be built by using two general

approaches:

1. General competitive position on the pay market2. Competitive pay market position for key job positions

General competitive position on the pay market

Setting the higher position than the median on the pay market isquite common competitive advantage setting in smaller companies,

who have to fight for the best talents with the big organizations in

the same industry.


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It is quite dangerous to set the pay market position too high as the

organization has to carry the increased costs and eats more from

the margins on the products and services. The organization cannot

make quick changes and the recession can be deadly dangerous forthe organization as it carries higher costs to keep the processes

operating and functional. The competitors have a better and bigger

space to decrease the personnel costs in bad times.

The higher competitive position on the pay market can be used in

the time, the organization grows dramatically and it needs the best

talents from the job market and there is no time to decide about the

key job positions in the organization and all employees are treated

to be of the same importance.

Keeping the long term higher pay market position is suitable just for

the companies in the modern industries, with high margins and the

companies with the excellent brand name being known for

employing the best of the best.

Competitive advance through strategic paymarket position for key job positions

The competitive advantage in compensation can be set just for the

key job positions in the organization. This solution is cheaper as therest of the population can be kept in line with the median of the pay

market or it can be below the median as the whole organization

keeps the median in general. But, the organization has to be able toreach the consensus about the key job positions in the organization.

Setting the key job positions is the painful procedure for Human

Resources getting the consensus from the top management is a bit

mission impossible, but HR has to accomplish this procedure

successfully as the key job positions are identified and Human

Resources can set the right compensation strategy for the key job

positions.


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The differentiation in the compensation strategy and setting the

different pay level for the key job positions is quite usual for the

larger organizations as they save the personnel expenses and they

are able to protect the key employees. It does not protect the keyemployees automatically, but it support the managers and other HR

Processes as the employees feel pretty satisfied with their salaries.

The competitive advantage for the key job positions is usually the

best pay strategy for the mature organizations, which does not grow

aggressively and are purely focused on the product innovations. The

key employees bring the innovations and the rest is paid fair

enough for their job content.

Why is compensationstrategy important?The current competitive conditions in the business world

make it difficult to acquire and retain the top talents. Once

the organization is able to identify, it can be unable to offerthe right pay and to manage the pay increases to retain top

talents. The compensation strategy is the extremelyimportant piece of the overall HR Strategy to keep the

company competitive and successful. On the other hand, the

compensation strategy is important to keep the personnel

budget under the control and to manage the jobs in the right

salary (pay) brackets.


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The compensation strategy differentiates the organization on the

job market and builds the attractiveness of the company for the toptalents. They love to be hired by the attractive organization, they donot like to be hired by the average company offering the sameconditions as any other average organization in the industry.

Competitive Advantage and

Compensation Strategy

Today, the products are similar. It is difficult to distinguish the cars

from different car makers. The employees are in the same situation

as the consumers. They have the problem to distinguish theemployers and they are not able to recognize the excellentorganization, when it is not different from the rest. The competitive

advantage is the essential part of the mix for the success. The

organization has to present itself differently, not just by the

presentation, but it should differentiate itself by the different

approach toward its employees. The compensation strategy is one

of the most successful differentiators.

The excellent compensation strategy does not just differentiate the

organization from the other organizations on the job market, it

brings the differentiation into the organization as well as thesuccessful employees and top talents feel the success in their

pockets.

The effective compensation strategy makes people feel the success

and they speak about their successes with their friends. It build the

extremely excellent competitive advantage among the competitors

as the people feel, the organization really values the success and it

can pay the successful employees.

The effective compensation strategy manages the personnel

expenses of the organization, but it supports the performance


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management and differentiates the employees as the successful

ones are not motivated to search for a new job opportunity. The

good compensation strategy does not provoke employees to search

the web job boards during the working hours, it makes them tofocus on delivering the results as they can be highlighted and they

feel the highlight in their salaries.

The successful compensation strategy gains the competitive

advantage and can speed up the innovation processes and improve

the performance management practices in the organization.

For what HR Processes isCompensation Strategy important?

The compensation strategy is not important just for the competitive

advantage, but it supports the other HR Processes and helps them

to become highly efficient HR Processes and being on the top in the

industry (when measured and benchmarked).

The compensation strategy has a strong influence on the

performance of the whole Human Resources, which is a good vehicle

to manage the performance of Human Resources, but has to be

managed carefully as it does not destroy the performance of the

whole organization. Smart compensation strategy supports the HR

Processes and helps to bring the top talents from the job market to

the organization and helps to retain the best talents in the

organization as they do not feel the need to find a new job

opportunity elsewhere.

Recruitment and Compensation Strategy

The effective Recruitment and Staffing cannot exist without the

effective Compensation Strategy. The recruitment can be based on

the excellent HR Marketing Policies, but the HR Recruiters have to beable to offer the competitive salary packages, which are competitive


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externally and fully aligned with the policies and the compensation

strategy internally. The recruitment of the best top talents from the

job market cannot be based on exceptions from the compensation

policy.

The recruitment and staffing processes have to be supported and

backed by the excellent compensation strategy as the HR Recruiters

can offer the competitive conditions to the right talents from the job

market and they are able to identify the key job positions, where the

compensation strategy allows to be more aggressive against the pay

market.

The job candidates are extremely sensitive to the salary package

offered in the Job Offer letter and the compensation and benefits

department should measure the number of failures in the job offer

acceptations. It is the extremely important sign of the wrongly set

compensation strategy, when the job candidates do not accept the

job offers made by the organization.

Motivation and Compensation Strategy

The salaries or bonuses are extremely important for the motivation

of employees and managers. Generally, the motivation is not about

the compensations, but the compensation should support the

general motivation framework in the organization.

Even the best managers in the world are not able to keep highlymotivated teams, when the compensation strategy is not in line with

the job market. The employees usually know the common levels of

salaries in the industry and when the organization is below the

median or the average, it has to compensate the difference in other

area. But, when the difference is too high, the compensation by a

different motivation tool does not work and the employees start to

feel demotivated as they receive no equal value for their effort.


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Talent Development and Compensation Strategy

The compensation strategy provides the key support to the talentmanagement processes in the organization. The talents have to beclearly supported by the compensation strategy as the talents

usually expect higher salary increases than the average employees

and the compensation strategy has to allow the limited freedom to

managers to do so.

The successful top talents management cannot survive without the

adequate support from the compensation and benefits side. The

talents have to feel the different approach of the organization andthe compensation is extremely important in this. The top talents

cannot live on the promises for a long time. They have to see the

real improvements and advances. They deliver, they expect the

organization the same.

The compensation specialists have to co-operate closely with the

career advisors and career development specialist to introduce the

right mix of the career opportunities and the compensation

strategies for the top talents.

Executive CompensationPlans


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Top management needs an outstanding compensation plan.The executive management is responsible for the delivery of

the business results to shareholders. They represent the

company to the outside world. They handle the strategic

initiatives. They are in a risky position. Their job contract can

be cancelled within minutes. They want the protection. The

executive compensation plan has a highly motivatingcomponent, and it guarantees the income protection in case

of the job cancellation.

Executive Compensation Plan

Principles

The shareholders buy the shares of the company to keep the value

of money. They expect even more. They expect to earn the extra

from the increased value of shares. The top management is paid for

the constant increases in the valuation of the company. It is an

absolute rule of the business.

The shareholders define the executive compensation plan. Theyusually cooperate with the CEO, who engages Human Resources in

the process of designing the executive compensation. The

shareholders define targets; shareholders expect the executive

management to reach targets.

The executive managers are not paid for developing the warm and

friendly environment in the organization. They are not paid for the

sympathetic and people oriented corporate culture, when it does not

bring benefits of increased profits for shareholders. The company

exists to make profits, it does not exist to employ satisfied

employees.

The principles of the executive compensation are:


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Clear focus on profits generation Long-term orientation of the compensation scheme Motivation of manager by high bonuses Non-cash focus of the compensation (stock options, shares, share

phantom schemes) Risk Management Balanced Scorecard implemented into the Compensation Scheme

The executive compensation scheme has to support goals given by

shareholders. The executives take risks of failing. They have to be

over-compensated for meeting goals. They should receive an

enormous extra bonus for exceeding the expectations (goals given

by shareholders). The balance in the compensation has to be infavor of exceeding goals.

The HR Professionals have to support the CEO in setting the

executive compensation scheme, which support the top

management in pushing the organization. The top managers have to

make tough decisions. They have to be compensated for

overcoming the stress, the pressure of the line management and

employees complaints about constant changes in the business

operation.

Human Resources has to understand the main business goals. HR

has to help in setting the executive compensation and alignment

with the performance based compensation for the rest of the

organization.

Compensation Policy


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The compensation policy is the basic document, which drivesthe detail of the compensation practices in the organization.

As the compensation strategy sets the high level

compensation goals of the organization, the compensation

policy describes the details of the individual compensation

components, their behavior and their role in the

compensation scheme of the organization.

What is the compensation policy?

The compensation policy describes the details of the compensationcomponents in the organization, how they are used and theconditions for the employees as the compensation component can

be applied in their specific situation.

Each organization uses many compensation components and they

have to be described. The compensation policy provides the basic

explanation of the compensation component, how it is calculated,

who is eligible for the usage and the approval procedure.

The compensation policy belongs to most read and discussed

internal policies of the organization as it drives the salaries of theindividual employees. Each employee is interested in the structure

of the salary and the potential total cash achievable in the

organization. The compensation policy is the main tool to find out

the details about the compensation components and the way, how

to achieve the highest total cash.

The compensation policy drives the effort and performance of

employees as the employees will find the smart and easiest way how

to achieve the highest possible income with the smallest possible

individual performance. The compensation policy has to be set the

smart way as it avoids the potential work-around and abuse.


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What is important in the

compensation policy?

The compensation policy has to be transparent and it has to providejust the only way of the interpretation. It is extremely important,

the employees and managers are not unsure about the

compensation component and they understand clearly, what

conditions are applied for the approval of the specific compensation

component.

The transparent compensation policy supports the high

performance corporate culture organization as the employees

understand, what behavior and performance levels are expected to

be eligible for the specific compensation component and it drives

the behavior and performance specifically the right way for the

organization.

The policy has to cover all the compensation components, which are

used in the organization and affects large populations. Theexceptional managerial component tools can be referenced from the

general compensation policy, but they should not stay hidden. The

employees cannot trust the compensation policy, which does not

mention all the compensation components.

Salary SurveysThe salary surveys are extremely powerful compensation andbenefits benchmarking tool. They are important for thesetting right compensation strategy and for following and


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monitoring the desired pay market. The salary survey is

provided by the external compensation consultant, who

gather the compensation information and salary details about

the individuals, match the information and provides feedback

about the pay market and pay structures back to the

participating organizations.

The salary surveys are always based on the proper job evaluationmethodology, which is standardized across the industry as thecompensation consultant can compare the jobs with the same jobsize as the job titles are not the suitable for the salary comparisons.

The company has to choose the right and suitable job evaluation

methodology and this know how is usually provided by the

compensation consultants for free.

Salary Surveys Benefits

The salary survey measures the competitiveness of the organizationon the pay market and provides the benchmark information about

the salaries on the general pay market and the specific industry pay

markets, when the organization operates on several pay markets.

The salary survey helps to set the internal compensation policy andto set the right optimal salaries for each job and to keep the desired

position on the pay market as defined by the compensation

strategy.

The salary surveys provide the information about the average salary

review percentage and the allocation of the growth of the salaries

into specific job positions across the participating organizations.

The salary survey can act as a tool to identify the key job positions

in the organization as the competitors can protect the key job

positions and it is usually visible in the salary surveys.


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The salary surveys provide the information about the new trends in

the compensation and benefits area and many surveys bring the

additional information like the average number of employees per

manager, the average length of service for the company, thenumber of promotions and many other.

What is important to know about

Salary Surveys?

The participation in salary surveys is a difficult decision as the

organization has to choose the right compensation consultant. The

salary survey needs a standardized approach to the job position

creation and the job position evaluations as the results of the salary

survey are credible and useful.

Human Resources has to have a clear plan for the usage of the

salary survey results and the presentation including the action planhas to be prepared for the top management.

The salary survey is about strictly confidential data and the

compensation consultant has to be widely recognized for the data

privacy practices and has to present the large population of the

participating organizations in the salary survey.

How to participate in Salary Surveys?

The organization has to select the right compensation consultant,

who brings the methodology for the job evaluation and determining

the job size. The organization has to evaluate all job positions and

prepare the salary data in the predefined structure as the

compensation consultant compares the right data.

The good compensation consultant will prepare a detailed

implementation plan and will act as the project manager for the first


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initial salary survey and will provide the help, when Human

Resources prepares the salary survey results presentation.

Sales IncentivesCompensation PlansNo business company can survive without the sales. The

sales brings the blood of the organization. The organization

needs the sales to grow and to successfully compete with

other organizations on the market. The sales incentivescompensation plans are the compensation tools to supportand motivate the sales function to compete and to increase

the sales volumes of the organization.

The art of Sales Incentives

Compensation Plans

The sales incentives compensation plan can really motivate thesalesman to sell more products and services. Or, they can easily

destroy the company, when the design of the sales incentive plan is

not good and it does not support the business goals.

The sales incentive plans should be always focused on increasingthe profitability of the company or gaining the additional marketshare. That is the theory behind the sales incentives plans. As theincentive plans are usually introduced purely by the business


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function, they fail and they do not support the goals of the

organization, they just allow the employees to earn more.

The art of developing the sales incentives plans takes several years

of learning and measuring the results achieved. The senior manager

of the Sales function usually knows, what has to be achieved, but

does not know, how to achieve that by using the incentive plans,

which are cost-efficient and not hurting the future of the

organization.

The sales incentive plan has to be fair to the whole organization.

The employees in the Back Office and the support functions should

not feel the internal unfairness. They understand, that the sales

representatives have to be motivated by the additional

compensation component, but it should be aligned with the overall

compensation scheme and the compensation strategy applied in the

whole organization.

Sales Incentives DevelopmentThe development of the sales incentive scheme has to be a jointinitiative of Human Resources and the business function. HR has todefine the general principles, which have to be applied in each

incentive scheme as it follows the compensation strategy and does

not break the internal equity in the organization.

The effective sales incentive plan does not evolve on its own. Thedevelopment process is creative and full of the conflicts between HR

and the business. The good incentive plan is always tested on

several employees to see the real results from the field as the joint

team can do the adjustments into the incentive scheme and can

make it more realistic.

The sales incentive scheme can be developed in the co-operation

with the external compensation consultant and it is recommended


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for the first incentive scheme in the organization, but the

compensation consultants should not be invited later in the process

as they can set a generic incentive scheme, which does not fully

support the goals of the organization. The organization shoulddevelop its internal know-how for the development of the incentive

schemes.

Documents

Audit Questionnaire of Compensation and Benefits