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Compensation Policy
Perhaps the most important aspects of the organizational environment are an organization's intentions and goals with respect to compensation. What the organization intends to do about rewards, and what goals it seeks to accomplish with the pay program, tell managers and employees what to expect. It should also provide stability, consistency, and the credibility the compensation program needs in order to work.
Organizations should determine and state their policies in the following areas:
- purpose of the compensation program
- communication
- who will make what compensation decisions
- intended market position
- intended equalization or differentiation of organization units (together with the rationale)
- intended mix of cash and benefits
- basis of individual pay decisions
Memory Jogger
An organization should determine and state its compensation program’s policy regarding:
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