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Compensation Management Strategies That Work

​Article prepared by Samuel,



Compensation Management Strategy
Image source: Pexels

The HR budget is often seen as the company’s biggest liability because of the incorrect notion that it is not income generating. When in fact, efficient and effective HR practices help save money for the company in the long run. One case that proves this statement time and time again is proper compensation management.

What does lead to company losses are mismanaged practices, misaligned goals, and ineffective strategies.

While HR practices can be susceptible to those, if its processes do not have frameworks or guidelines. This is especially true for compensation management which handles the bulk of the department’s budget.

This article will look into effective and tested compensation management strategies that you can try for your organization.

What is Compensation Management?

Compensation management is the field or discipline that oversees how a business manages its budget for compensation–which already includes all the employees’ base salaries and added benefits.

Much like its other well known HR practices, compensation management lays down sound foundations like guidelines, policies, and best practices for compensating employees.

Since HR practices grow more complex as the organization grows, modern workplaces are also introducing compensation management software into their system. This software handles the brunt of the work. It also digitizes the entire process and helps carry out specific strategies efficiently.

As such, there are different strategies that become easier to follow through because of the said software. Here are a few:

4 Effective Compensation Management Strategies

1.   Assess Existing Strategies

To ensure that you will only be working on effective compensation strategies, assess your current strategies and frameworks first. Filter the effective from the non-working ones. Aside from that, you get to see the redundant rules and strategies that add nothing but more costs for the company.

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After a thorough assessment, you can then segregate which ones need some rework. You can then note which ones only need slight revisions to fit with the organization’s current structure, and which ones need to be entirely scrapped.


You can also get a clear idea of the gaps that you need to fill in. Are there any processes that aren’t digitized yet? Are there unaccounted costs? All these will be discovered after an extensive assessment of your company’s current compensation strategies.

2.    Write Up a Clear and Streamlined Plan

After the assessment, the next point of action is to devise a clear plan. Any strategy, no matter how large its scope is, needs a clear plan to achieve its goals in a timely manner.

For compensation management alone, you need several streamlined plans to support the broader ones. Also, always keep in mind that these plans need to be in line with the current corporate strategies.

Some facets that you need specific plans for are the following:

·         Salary Grades

Despite being a major motivation for employee retention, discussions about salary are still considered taboo. You can follow this norm or break out of it through your compensation management plan. You can opt for an open-door salary discussion and get rid of any non-disclosure agreement about it.

Aside from that, establishing a tiered salary pay scale is another plan that you can cover in your salary grade framework. An established pay scale will correct all speculations about biased salaries. With this framework, each job role is matched up with a salary grade.

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These major decisions must be set in writing in your compensation management plan.

·         Employee Benefit Packages

Similar to base payments, benefit packages are often left unquestioned. However, when you do decide to change up your management plan to offer flexible plans, you may.

A strategy that works for modern organizations is to offer cafeteria benefit plans. This is implemented in the US, but you may adopt this strategy even if you are based outside as an added perk for your company. Letting them choose the benefits that they want puts them in control. It’s an added intrinsic motivation that makes the employees more diligent and productive.

·         Performance Management

Together with another human resource facet, you can also create a plan that is specific for performance evaluation incentives. At the end of the day, these incentives are still part of their compensation.


You may benchmark the best practices of other companies on how they incentivize this process. Benchmarking is especially ideal for smaller and start-up companies who want to provide the ideal benefits for their employees right from the very start.

3.           Partner Job Roles with Ideal Compensation

A good compensation management strategy that works wonders is matching up jobs with pay grades. This seems like an easy, no brainer strategy, but it actually requires a lot of rationalizing and convincing of the higher ups.

Ideally, compensation increases together with the workload. However, that doesn’t materialize most of the time. It’s a sad reality that most people have to put up with. But, together with a better compensation plan, you and your organization can do away from this practice.

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In implementing this strategy, using a compensation management software system will help lessen the workload. Since it digitizes the process, all adjustments are made faster and making it less susceptible to human error.

4.           Communicate Your Strategies

Lastly, you need to properly communicate your streamlined strategies to the affected stakeholders, which pertains to basically every member of the organization.

Always remember that compensation management goals, visions, and plans need to be in line with the overarching corporate goals and strategies. Thus, communicating your strategies is just as important as planning and implementing them.

Also, staying mum about your plans is unfair to the other members of your company. Transparency is a must, and is always a priority.


Compensation is one of the biggest reasons why an employee continues to work for a role that they are not happy about. It’s a harsh truth that HR practitioners know and live with everyday. Thus, best measures towards better compensation management is necessary to keep the competent people in the organization.

Compensation management strategies like laying out streamlined plans and matching salaries may seem simple, but the process behind these can be daunting. So, make sure to use and consider everything that can help lessen the load such as management software tools.

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