What companies should consider when developing a compensation strategy

Factors to consider when developing a compensation strategy 1Enterprise development strategy and development stage factors When designing compensation, the development strategy of the enterprise must be fully considered, which is consistent with the principle of strategic orientation. If the company implements a differentiation strategy, it is necessary to implement competitive compensation for key positions; If the company is implementing a cost leadership strategy, it is not necessary to pay too much competitiveness.

In fact, the company's development strategy is decomposed into human resources strategy and implementation measures, and in this process, the remuneration concept and salary strategy will be reflected. The design of compensation must also be combined with the company's own development stage, and different stages have different requirements for compensation strategies. For example, in the early days of establishment, the company's compensation strategy focused on ease of operation, while the growth stage of the company paid more attention to incentives, and the mature stage of the company paid more attention to fairness.

2.Corporate culture factors Corporate culture is a long-term historical accumulation, is the collective unconscious performance, in the development of compensation strategy to consider the core values of the enterprise factors, salary level, salary structure, salary composition and other design should reflect the company's corporate culture characteristics. For the egalitarian corporate culture, fixed income should account for the vast majority of the salary composition, floating pay such as performance pay and bonuses should account for a smaller proportion, and pay equity should pay more attention to internal fairness to minimize the pay gap; For the performance-oriented corporate culture, the fixed income should occupy a small proportion in the salary composition, the floating salary such as performance salary and bonus should occupy a large proportion, the salary structure should pay more attention to external competitiveness, and the internal salary should try to widen the gap to reflect the idea of more work and more reward.

3.External environmental factors External environmental factors include market competition factors and social and legal environmental factors. Market competition factors include market salary level, market talent supply and demand, competitors' salary policies and salary levels, the characteristics and competitive situation of the market where the enterprise is located, etc.; However, the social and legal environment factors need to consider the local minimum wage standard, the relevant overtime wage regulations, the relevant national insurance benefits and other policy factors.

4.Internal Factors When formulating a compensation strategy, an enterprise should be constrained by the company's profitability and financial situation, and should form a win-win situation for shareholders, management and employees. If the company's profitability is very good, the financial cash flow is sufficient, and the competitive salary is implemented, the income gap between internal employees should be appropriately widened; If the company's profitability is poor and the financial cash flow is tight, then the salary level should not be too high, and the income gap between internal employees should not be too large to maintain the stability of employees' minds.

1.Market factors: Companies should understand the pay levels in their industry and region, as well as the compensation of their competitors, so that they can develop a competitive compensation strategy to attract and retain top talent.

2.Performance factors: Enterprises should consider the performance of employees, formulate performance-linked compensation policies, and motivate employees to improve their work performance and work quality.

3.Job factors: Enterprises should formulate different salary standards and salary structures according to different job needs and responsibilities to attract and retain suitable talents.

4.Corporate culture factors: Enterprises should consider their own cultural characteristics and values, and develop a compensation strategy that is in line with the corporate culture to improve employee loyalty and sense of belonging.

5.Legal and regulatory factors: Enterprises should comply with relevant national and local laws and regulations, and formulate legal and compliant salary policies to ensure the rights and interests of employees and the legitimacy of the company's operation.

6.Fairness and justice factors: Enterprises should formulate fair, just and transparent compensation policies to avoid excessive or unreasonable salary differences, so as to ensure the enthusiasm and satisfaction of employees.

Answers]: a, c, d, e

This question examines the basic steps in the design of a compensation system. When determining the level of compensation, companies can choose a leading, following or lagging strategy, and can also implement a hybrid strategy within the company according to the characteristics of the position. Circumstance.

Answer]: AP409) Efficiency is a priority that should be prioritized when developing a holistic rewards strategy.

The main factor considered in determining the composition of a company's compensation is the supply and demand of labor.

Remuneration structure refers to the overall composition of different remuneration composition and proportions adopted by the company when paying remuneration. It usually includes the following factors:

1.Basic salary: The basic source salary is the most basic salary level that an employee should receive under the company's position level and work experience. The amount of basic salary is related to the employee's job position, working years, education and other related factors.

2.Performance bonus: Performance bonus is a bonus issued according to the performance of employees, and is a way to encourage employees to work actively and improve their work performance.

3.Allowances and subsidies: Allowances and subsidies refer to some additional remuneration provided by the company to employees, such as meal allowances, transportation subsidies, communication subsidies, etc.

4.Benefits: Welfare refers to the various benefits provided by the company for employees, such as social security, medical insurance, housing subsidies, paid annual leave, etc.

5.Title allowance: Title allowance refers to an additional remuneration given by the company to employees according to their professional titles and professional skills.

The following main factors should be considered when designing a compensation structure:

1.The company's operating conditions: The company's operating conditions are an important basis for formulating the salary structure, and the company's financial status, business development, market competition and other factors need to be considered.

2.Employees' work content and requirements: Different positions have different work content and job requirements for employees, and the corresponding salary structure needs to be designed according to the requirements of different positions.

3.Employees' work experience and ability: Employees' work experience and ability are important factors affecting the salary structure, and the corresponding salary level needs to be set according to the employee's work experience and ability.

4.Industry salary level: The salary level of the industry needs to be considered to ensure that the company's salary structure is competitive in the market.

5.The company's development strategy and talent management strategy: The company's development strategy and talent management strategy are an important basis for formulating the salary structure, and the salary structure needs need to be designed by considering the company's future development needs and talent management strategy.

Companies typically consider the following factors when deciding on a compensation structure:

Market**: Companies consider the salary level of their industry and the salary structure of their competitors to ensure that their compensation is competitive in the market.

Employee Competence: Employee competencies, skills, and experience levels are taken into account to determine the level of compensation for employees with spine.

Job Responsibilities: The company will consider the responsibilities, work content and difficulty of different positions to determine the salary level of different positions.

Performance: Companies will consider employees' performance to determine performance bonuses or equity incentive plans.

Corporate Strategy: Enterprises will consider their own strategic goals and development directions to determine whether the compensation structure can motivate employees to contribute to the strategic goals of the enterprise.

Laws and regulations: Companies will consider local laws and regulations to ensure that the composition of compensation complies with the requirements of laws and regulations.

There are several strategies that organizations can employ when determining compensation levels:

1) Market-leading strategy. The Market-Leading Strategy is also known as the Compensation Leadership Policy. Organizations with such pay levels tend to pay much more than the market average.

Higher pay levels can bring a lot of benefits. Benefits include quickly attracting a large number of candidates to choose from, reducing the cost of employee selection, reducing the turnover rate of employees with low levels of success through increased opportunity cost of employee turnover, and reducing oversight costs. However, organizations that adopt a market-leading strategy tend to have a lot of management pressure, because although a large number of capable employees are hired by paying higher salaries, if they do not manage to achieve higher profits, then high salaries can become a burden that brings down the organization.

2) Market following strategy. This is one of the most common compensation strategies, and it is actually a practice of determining the salary positioning of the organization according to the market average. Organizations that implement this compensation strategy often want to ensure that their compensation costs are in line with the costs of their product competitors, so that they are not disadvantaged in the product market, and at the same time they want to retain some of their ability to attract and retain employees and not lose out to competitors in the labor market.

An organization that adopts this compensation strategy is likely to have the least risk of attracting a sufficient number of employees to work for it, but has little advantage in attracting very good candidates.

3) Market lagging strategy. Organizations that adopt market-lagging strategies tend to be relatively small in size, mostly in competitive product markets, with low marginal profit margins and weak cost affordability, and are mostly small and medium-sized organizations. The inability to provide high levels of compensation to employees due to lower profit margins in the product market is a major reason why these organizations are implementing lagging market strategies.

Obviously, market lag strategies are very detrimental for an organization to attract high-quality employees, and the turnover rate of employees tends to be higher in organizations that implement such policies.

The main factors influencing the compensation strategy are external competition factors and corporate culture values (fairness and performance).

Compensation strategy. 1) Compensation level strategy.

The level strategy of compensation is mainly to formulate the company's own salary level strategy relative to the local market salary** and the salary level of competitors. Compensation level strategies for companies to choose from are:

Market-leading strategy: Enterprises that adopt this compensation strategy are in a leading position among their competitors in the same industry.

Market following strategy: Enterprises that adopt this strategy generally establish or find their own benchmark enterprises, and the operation and management mode of the enterprises are in line with their own benchmark enterprises, and the same salary level is similar to that of benchmark enterprises.

Lag strategy: also known as cost-oriented strategy, that is, enterprises do not consider the salary level of the market and competitors when formulating the salary level strategy, and only consider saving the cost of production, operation and management as much as possible, and the salary level of this kind of enterprise is generally relatively low.

Mixed compensation strategy: As the name suggests, it is to adopt different compensation strategies for different departments, different positions, and different talents in the enterprise.

2) Salary incentive strategy.

First, we should focus on the objects of encouragement.

Second, it is necessary to focus on the content of incentives.

3) Compensation structure strategy.

The compensation structure strategy first refers to which parts of the salary are made up of and what proportion each is accounted for. The strategies you can choose from are:

Highly flexible pay model: This is a highly motivated compensation model, where performance-based pay is the main component of the compensation structure, and basic compensation is in a very secondary position, accounting for a very low (or even zero) percentage.

High Stability Compensation Model: This is a highly stable compensation model, where basic compensation is the main component of the compensation structure, and performance-based compensation is in a very secondary position, accounting for a very low (or even zero) percentage.

In practice, performance pay and basic pay generally account for a certain proportion. When the ratio of the two is constantly reconciled and changing, this compensation model can evolve into an incentive-based model or a stability-based compensation model.

The compensation structure strategy then refers to how many levels of compensation are divided into and how the levels are related. If there is a large gap between the general levels, focus on motivating high-level personnel; If the level gap is small, the salary is more even.

4) Compensation mix strategy.

The compensation mix strategy refers to the form of total compensation paid to employees, and the combination of these compensation forms. Compensation portfolio strategies include portfolio type strategies and portfolio ratio strategies.

Portfolio strategy refers to the strategy adopted by the enterprise for different employees, including the simple strategy - only one form of compensation for some employees, and no other form of compensation; Compliant strategy – Employees adopt a variety of compensation methods.

The portfolio ratio strategy refers to the focus of the enterprise in the form of compensation for different employees, such as the strategy of incentive compensation for sales personnel, and the salary strategy based on position salary for administrative personnel. Companies decide which compensation mix ratio strategy to adopt based on their primary form of compensation.

There are many factors that affect the setting of compensation, and these factors can be divided into two types: internal and external.

i) Internal factors.

There are a number of internal factors that affect the setting of salaries, mainly involving the following aspects:

1.The nature and content of the enterprise. In labor-intensive enterprises, employees are mainly engaged in simple manual labor, and labor costs account for a large proportion of the total cost; In high-tech enterprises, high-tech employees predominate, and these employees are engaged in high-tech intellectual work, so labor costs do not account for a large proportion of the total cost.

The compensation strategies of these two types of companies are necessarily different.

2.The organizational culture of the enterprise. Organizational culture has a significant impact on compensation setting, and companies often have some formal or informal compensation policies in place to indicate their competitive position in the labor market.

3.The ability of the business to pay. Businesses that are more successful tend to pay more than the labor market level. This ability to pay can generally only determine the maximum amount of remuneration set, and there are many other factors that need to be considered in how to set the salary reasonably.

4.Employee. Often, if a company expects an employee to be able to engage in a certain behavior, it must reward the employee as soon as that behavior occurs.

Therefore, the level of individual performance of employees is an important factor influencing the setting of compensation. In addition, employees' qualifications, experience, potential, and skills will also affect the setting of salary.

ii) External factors.

External factors are also multifaceted, and they are:

1.Regional and industry characteristics. These characteristics also include ethics and values. For example, in an "egalitarian" society, there will not be a large difference in the level of pay set.

2.Local standard of living. As the local standard of living increases, employees' expectations of personal life will increase, which creates higher salary pressure on enterprises.

3.National policies and regulations. Many countries and regions have provisions on salary floors and gender discrimination.