Compensation 101 - Compensation Checklist

This topic is hotter than a hotdog fresh off the 4th of July BBQ grill!

Right now, we are working with clients on a variety of compensation projects. Not surprisingly, we find that many employers have compensation structures that are out of whack due to inflation and the persistent battle for talent. Savvy job seekers have done a nice job advocating for themselves. There are also emerging pay transparency laws that have caught some employers off guard. Worse, many employers don’t even have a compensation structure.

This blog will bring down the temperature by providing you with an overview of compensation topics, why they are important, and a step by step guide to putting one in place.

Step 1 - Compensation Philosophy or Strategy

The first thing to do is to come up with a high level approach to compensation: Do you want to be paying your people below, at, or above market?

Step 2 - Update/Create Job Descriptions

Everyone’s favorite thing to do - right? Well, you can’t put together a compensation plan without this key component.

Step 3 - Group Into Job Families

Don’t overlook the opportunity to create “in-series” promotional opportunities for your team members.

Step 4 - Internal Equity

Take a look at the value that each position plays in the organization, so that your organization compensates and rewards people in a fair and strategic manner.

Step 5 - Market Research

Review external data on the current labor market in your area to make sure that your pay is competitive. This is key so that you don’t lose people.

Step 6 - Create Job Grades

Create job grades/levels/bands that provide a logical framework for compensation.

Step 7 - Determine Salary Ranges

Each grade/level/band will have a range. Each range will have a midpoint.

Step 8 - Determine Compensation Components

Select a mix of compensation elements (base salary, bonus, commission, equity) that is aligned with your culture and strategy. This is one of the most impactful ways that you can motivate and retain your team.

Step 9 - Determine Adjustment Process

You will want to carefully determine and communicate this process to your team. The most common process is to review and adjust compensation annually. The adjustment is made due to performance, an increase in the cost of living, or both. This is a hot button issue for employees for a few different reasons. 

Common issues include:

  • The process is not clear to the employees. Sometimes there is no process to begin with. I’ve had clients that only make adjustments when an employee is about to leave because they got a better offer.
  • The design is connected to performance evaluations in a way that creates unhealthy competition, or pressure on managers.
  • The compensation and performance management process is not aligned to what is most important for employees to focus on.
  • The process does not take into account the desired culture.

Want to dive deeper?

Here are some free resources we can provide for you:

  • Compensation white paper that goes into much more detail on the nine step process, and includes a template for a “Total Compensation” communication for your employees.

Want to take your culture to the next level?

Here are some ways that we can help:

  • HR one-hour mini-audit to talk about your compensation vision and how to get there - $150
  • Compensation structure for up to 20 positions - $995

Schedule an appointment with our HR expert, or call us at (734) 747-2936 to determine if this is the right fit for you! 

Stay tuned! 

Next month I’ll be musing about the topic of Succession Planning. Do you have a question that I can answer - send it to me at


About The Author: Amy Cell

Amy Cell is a renowned and passionate pioneer in HR and Talent initiatives. She also leads an innovative consulting firm that specializes in recruiting and HR services for startups, small businesses, and municipalities.

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