Compensation planning

What is the first thing you look at while you take on a new job? The most important thing an aspirant looks for part from the job description is the pay that he/he will be entitled to. Many even base their decisions of accepting or declining the job offer in the basis of the salary he/she would draw. So what is the deciding factor when it comes to ones pay package? While joining an organization, a new entrant is usually paid based on to the destination he/she is given. However, after a certain period of time, what should be the deciding factor for an employee’s salary. Experts sat that salary planning is one of the most crucial aspects in deciding an employee’s growth in an organization and every employee’s salary planning should be done with utmost care.

Even though career planning takes the cake when it comes to an individual’s career, salary is just as important as it eventually becomes the deciding factor. Experts say that equal importance has to be given to this so that an individual does not feel that he/she is being compensated less in the organization. Experts say that there are certain basics that need to be kept in mind while salary planning. Though it is not considered to be rocket science, the organization has to make sure that they do justice to an individual’s qualification, experience and past work.

It is one of the most important aspects for an employees’ development in an organization; not only for motivating the employee but also for developing a suitable career plan.

Experts say that though it is an important part of an employees’ career it is to an easy job. HR needs to keep quite a few things in mind to make sure that they have been fair to the employee. When an employee joins the organization, we plan the salary for one year and the decision is entirely based on his/her experience, expertise performance in the past organizations/institutions and his/her fitments with our needs. Over the years, Salary decisions for the employee then depend on merit ad performance.

The compensation a firm offers plays a significant role in determining the level of financial talent one is able to attract. Starting salaries of new hires are normally placed within the first quartile of the salary range. Subsequent to employment, salaries normally change as a result of a portion an annual merit increase or an adjustment to maintain equity.

Designation v/s performance:

With the passage of time, every employee’s salary package changes. And when time comes, the employee expects that his/her compensation package would show a considerable change. Though this usually happens during the appraisal process of the employee which is performance based, many employees felt that they are rarely adjudged on their complete performance and usually designation of the individuals takes more priority. So the question here arises is what should be the basis of salary planning?

Salary planning should always be more value based. It depends a lot on the specific performance of the employee in that given value period and this should be shown in the feedback And this should to be done during an appraisal period and should be given immediately as it becomes easier for the employee to understand as to what has happened and the reason for the outcome.

Organization needs to keep more than just the performance and designation in mind while planning.

Liking pay and performance is not always a good idea, and that pay should not be used to motivate employees to do a better job because they stop focusing on things like quality of work and how to improve his or her performance and start focusing on money and how much the raise is. Pay for performance pits employees against one another in competition of the highest raises. That’s why some businesses give the same, across the board raises to all employees. It eliminates competition and ensures that the whole workforce is working towards the same goal. But, if everyone gets the same raise, there is no motivation to exceed expectation to go the extra mile in the job.

While salary planning is important experts say that salary of the individual cannot necessarily make an employee stay or leave the organization. By saying that salary is a major factor influencing an employee’s decision stay in an organization, in addition to other things like job description career progression, work environment etc. It’s all about the employees understanding their needs and how the organization will take care of that need. Employees need to understand developments that are taking place in the organization and the way these development will affect them. This reduces employee insecurity. Hence an effective two way communication between managers and employees is essential to keep the latter informed of where the organization is going and how it is growing. A common consensus cannot be defined when it comes to salary.

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  • gitika

    itz u gud topic. often side tracked for more appealing ones. bt itz importance still holds. hey can anybody plz. help me ! i shall b atdng the compensation systen at PSU as my summer project . also m dng a satisfaction survey for Employee benefits . can somebody gv me some hints for d questionnaire

  • Kruti

    Thanks a lot for sharing the information its really good..

  • Shilpi

    Compensation planning is generally ignored by most of the organizations though it is one of the most critical factors of HR. though organizations wont agree to this and state that they have well planned compensation systems, it is a fact that most of them dont do this and decide the salaries of their present employees on the basis of either performance or their stay in the organization (the employees working in the same organization generally expect their salaries, in terms of the increments to be more than their other colleagues).

  • Pelham

    Thanks for the information. As a Remnerations Manager I think this is one of the key arears we need to address.

  • Ashwin Prajapati

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  • Prajapatiashwin

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