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The Most Important Factor in Determining Talent Compensation — And Why You Need a Strategy

What is your compensation strategy — or do you have one at all? In many workplaces, employers are often just throwing darts to ultimately decide upon the monetary figure which becomes an employee’s salary. Last week, we asked all of you to answer the following question for a chance to win a Talent Compensation Portal report for two job positions: What do you think is the most important factor in determining compensation?”

We received some excellent and diverse answers from you, our readers, and here are a few:

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I believe work experience is the most important factor in determining compensation. Likewise, job performance should be the #1 determiner for raises and promotions. –Heather

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The most important factor is the value the employee brings to the company. It’s not an exact science because there are multiple things to consider but at the end of the day you don’t want to be paid more than the value you are giving to your company or else it will be a short-lived situation. –Joe

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I see experience along with certification/education as the biggest factors, but someone showing initiative and doing work beyond their job duties to better the company is deserving of a raise or promotion. –Stephanie

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A person’s earnings at his/her most recent employer. –Jaime

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A like position should not pay the same in NYC as it will in rural Nebraska since the cost of living are no where even close to the same. HR departments must know what their competition is offering for like positions “down the street” to be competitive and attract the best person for their company. A company that offers excellent benefits needs also to promote this to the candidates. –Lisa

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When determining compensation for a new hire – experience, drive, passion, and aptitude play a role in compensation. If I can tell the new hire is applying or interviewing because they are just looking for a paycheck, I will not compensate them at the same rate initially as someone who is coming to the position with the same experience but is thirsty to grow. –Allison

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The single most important factor in compensation is relevant job experience. Education is important, but someone with a degree and no relevant work experience, should not recieve as high a pay scale as someone who was working in their chosen field while getting their education, even if it was an internship. Attitude, drive, flexibility, vision, achievable goals all should be considered at the time of performance evaluation or promotion time. -_DG

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Results, ROI, Performance – whatever you want to call it. New hire or veteren – it’s the one with a proven track record that should get the greatest compensation. –Brenda

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There is a salary range for various “job titles w/descriptions/qualifications” in every industry area which is usually a boiler plate for compensation. Based on these salary ranges, employers will negotiate a compensation package within that range or sometimes higher to recruit and retain the best talent for all positions. –Sherry

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The mention of a “boiler plate” is interesting, as are the answers we received from many of our readers, precisely because the idea of what compensation strategy is, or should be, is so varied. As we’ve seen from the responses, many employers think of  compensation strategy in terms like  “experience,” “past performance,” or “recent salary.” While these are definitely important and part of what makes up a strategy, it’s also important to think beyond these factors to questions like:

  • What are you measuring a candidate’s experience against to determine the right salary?
  • What are your competitors doing?
  • What is the most frequent salary for the position you are filling, in your geographic area and industry?
  • Do you have any idea whether your number is on the low or high end of the scale?

Compensation strategy is essential for attraction and retention

Obviously, your company doesn’t just pull a number out of thin air (right?), but it is important to understand which factors are involved in deciding upon a fair salary – and how those factors are determined in the first place. Assigning weight to factors arbitrarily without research off which to base it and back it up can be a dangerous decision.

If you want to position yourself as a best-in-class organization, it is wise to start thinking now about which compensation factors are important to your company, then use the most current and accurate compensation statistics to develop a strategy around your company’s compensation decisions.

Compensation is not only a big expense to businesses of all sizes, but is also crucial in both attracting and retaining your best employees. If your company doesn’t know the right compensation for a particular position, it is difficult to compete for a stellar candidate. And if your current employees find out that your company doesn’t realize their true worth, they’re not going to be sticking around for long.

As the employment market is constantly changing, your company, too, must continue to evaluate and adjust your compensation strategy to ensure you’re remaining competitive and balanced. With the most fresh and comprehensive compensation data at your side, your company can start putting method behind your money – and reaping the rewards.

Amy K. McDonnell

About Amy K. McDonnell

Originally hailing from Ohio, Amy is the editorial manager on the content services team and has been with both CareerBuilder and the city of Chicago for nearly a decade. She writes on a range of recruitment topics on The Hiring Site, striving to bring a dose of clarity and humor to sometimes complicated issues around employee attraction, engagement and retention. When she's not working, Amy spends as much time as possible reading, pretending to be a chef, writing short stories, eating Nutella out of the jar, waiting for CTA buses and trains, going to see her favorite bands live, and spending time with people who inspire and challenge her.
0 comments
Rajkishor rout
Rajkishor rout

Traditionally, an employee's pay increases with years of service. A widely held view is that, through experience, employees become more effective problem solvers and are more dependable. However, as the global economy increasingly demands ongoing business change and higher levels of productivity, employers have looked at how pay and reward systems can improve an organization's performance. For many employers, the goal now is to integrate the organization's compensation and reward philosophy with its strategic initiatives regarding customers, profitability, and the development of a strong, competitive work force focused on the success of the organization. As a result, employers are using more sophisticated performance evaluation systems (e. g., 360-degree feedback that includes input from one's supervisor, colleagues, and direct reports) in an attempt to identify and recognize their top performers. It is not unusual to see a range of a +/-10% percent salary differential for individuals in the same job depending on their performance.

Clair
Clair

Fact-  companies have overhead, burden rates and benefit compensation rates and national scale per region suggested  rates built in to each offer. The HR and Finance offices of each company know what those salary or hourly rates are ahead so their is little guessing on the hiring managers end.  Too, the government puts out a National Employment Salary recommendation  and has for years so that companies can stay in step with pay scales for each Job category. I worked in government Contracting so I know specifics here, end result, there is no guessing.

Next the questionaire you fill out or application asks about your past jobs, experience and rates

some applicants put down various figures, most are accurate some are not. The HR person then

goes in to the interview process, and a lot depends on personality, skills, and years of performance in the same of similar job category. If the applicant comes close to the job description that is pretty much how they are narrowed down. It's not always the candidate with a degree but that may help to narrow the choice further. This is a major process as each rate as said has all the burden and scales already built into the offer. Health benefits are a major expense for companies and a liability so that is part of the built in figure the company allows for in their hiring offer. There is No guess work the HR person already knows the figure that will abide with. Bonuses may be involved as well so the HR person works with a percentage they can offer as well.

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