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Compensation Playbook Cheat Sheet

Early adoption of this compensation roadmap pays off. It allows companies to attract & retain their most valuable asset — their people — and thoughtfully use their budget.

The ROI for implementing these compensation initiatives enhances efficiency, profitability & pay transparency.

  1. Compensation Philosophy

    1. Select the market percentiles you plan to target by job family. For example, meet the market by targeting the 50th percentile for non-technical jobs (due to a larger talent pool) or lead the market by targeting the 65th or 75th percentile for technical jobs (typically requires a special skill-set).
    2. Select the market data cuts to use by work location.
  2. Job Leveling

    1. Identify level criteria (compensable factors) to include in level definitions
    2. Establish concise level definitions for each job level (for both individual contributor and management tracks)
    3. Map all employee’s jobs to a level, focusing on the job, not the individual
  3. Salary Ranges

    1. Develop salary ranges for each job family by job level, where the midpoint aligns with the compensation philosophy chosen
    2. Acquire reliable market compensation data like
    3. Establish the minimum of the range by taking 85% of the midpoint
    4. Establish the maximum of the range by taking 115% of the midpoint
  4. Equity Guidelines (optional)

    1. If your company offers equity (e.g., stock options), establish guidelines for new hires & refresh grants using market equity data
    2. Model out & budget shares you need for the year, and it’s respective dilution rate
  5. Compensation Review

    1. Provide your leaders with various data points (e.g., market salary data, current salary, performance rating) to make pay decisions.
    2. Model out and budget cash needed for salary increases (e.g., for merit & promotions), annually.
  6. Pay Equity Analysis (optional)

    1. Step 1: Calculate each employee's compa-ratio
    2. Step 2: Bucket by job family, job level, & job
    3. Step 3: Find gaps using average compa-ratio for comparison
    4. Step 4: Document reasons for gaps
  7. Variable Pay Review (optional)

    1. Review target amounts for bonus & commission against the market for those eligible
    2. Establish pay mix guidelines for sales employees by role, and use them consistently (e.g., for offers and promotions)
    3. Assess the design of incentive plans to ensure they are driving desired behaviors
  8. Repeat!

    • Start over with #1 by reviewing your compensation philosophy at least annually

About Kamsa

Kamsa's hybrid approach to providing market data + consulting services helps leaders make data-driven pay decisions & allows companies to pay employees fairly, painlessly.

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#CompensationPlaybook #Compensation101 #benchmark