 Effective
Compensation views total compensation as a strategic
collection of a number of programs developed to accomplish
specific organizational objectives. The programs can be
classified into the following categories:
- Base
Salary
- the fixed amount to be paid (often for performance)
according to a system of job classification or market
based criteria.
- Incentives
- additional variable pay based on performance against
objectives and payable in cash, stock or tax-deferrable
arrangements.
- Protectives
- programs which insure employees against loss of life or
earning ability, and which insure against major current
expenses.
- life
insurance
- medical
insurance
- survivor's
income
- dental
insurance
- disability
income
- Capital
Accumulation
- programs, usually stock plans, that provide the
opportunity to establish a personal estate under
attractive conditions. Phantom equity arrangements and
long-term incentives can also be included under this
category. Such programs should serve the owners by
aligning management's interests with that of the
shareholders.
- Retirement
Income
- plans that defer income for services rendered to a later
payment date (qualified plans such as pensions, profit
sharing, and thrift plans as well as supplemental programs
and employment contracts).
- Perquisites
- company paid allowances beyond direct pay (free parking,
automobile and operating expense, expense allowance, total
medical reimbursement, club memberships, etc.).
- Paid
Time Off
- vacations, holidays, family leave, jury duty, etc. .
In
addition, the way compensation is allocated
to and communicated
to employees affects the effectiveness of the programs.
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Effective:
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Compensation:
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Affordable
Aligned
Appreciated
Appropriate
Attractive
Competitive
Communicated
Coordinated
Cost Effective
Current
Deliberate
Distinctive
Efficient
Empowering
Enduring
Equitable
Flexible
Focused
Forward Looking
Goal Oriented
Guiding
Integrated
Justifiable
Knowledgeable
Legal
Leveraged
Manageable
Motivating
Necessary
Opportune
Optimized
Performance Based
Polished
Prudent
Relevant
Retentive
Simple
Strategic
Successful
Targeted
Team Spirited
Understood
Values Based
Warranted
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Concrete
- Base
Salary
- Incentives
- Retirement
Income
- Capital
Accumulation (equity/stock plans)
- Protectives
- medical/dental/vision/life
insurance
- disability
income
- survivor's
income
- Paid
Time Off
- Perquisites
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Subjective
- Nature
of Work
- Recognition
- Career/Pay
Opportunities
- Education/Learning
Opportunities
- Working
Environment
- Work
Hours/Load
- Time
Demands
- Management/Leadership
Style
- Employee
Culture
- Employee/Management
Communications
- Industry
- Organization
Image/Reputation
- Location
- Community
Involvement
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The
process for developing / maintaining the programs
that support effective compensation
must fit each organization's situation and style.
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