Compensation Plan Approaches

The objectives of any compensation approach, whether it is a base salary program or an incentive plan should be to pay employees equitably, based on the relative internal value of each position and the external market value.  Compensation plans must be designed and administered to attract, motivate and retain qualified personnel while controlling costs  Compensation programs have become increasingly more complex and strategic for organizations as effective approaches should align with an organization's culture and business cycle.  Strategically, growth-oriented companies position their compensation levels to be competitive regarding base salaries and aggressive regarding annual and longer-term incentives. Compensation plan design should be relative to an organization's business stage: