How Attractive is Your Compensation Plan?

By Paul Feeney Managing Director, Sanford Rose Associates - Wayne | February 22, 2010

All that having been said, executive recruiters know one great truth: While candidates have been known to decline high-paying jobs, few will accept low-paying ones.

Many employers, nonetheless, find it increasingly difficult to offer superior candidates superior salaries. That's because salary ranges have fallen victim to disappearing merit budgets, the flattening of corporate organization charts and the growing emphasis on pay-for-performance incentives in place of high base pay.

Hiring managers and HR professionals can address this challenge by keeping three compensation principles in mind: (1) there is more to compensation than salary; (2) not all components of compensation serve the same purpose; and (3) different kinds of organizations need different kinds of compensation plans.

Adding up Total Compensation

Total compensation consists of 4 main elements - fixed pay, variable pay, special awards and benefits.

Fixed pay (Or base salary) has fallen victim to a combination of corporate cost-cutting, the growing suspicion in many companies that "merit" increases have become too automatic, the resulting use of merit budgets as basically cost-of-living adjustments and the emerging belief that pay should be viewed as a reward for the achievement of specified objectives - as opposed to an entitlement based on position and years of service. Moreover, as organizations have become more horizontal (with fewer opportunities for promotion), the number of position levels has decreased. The resulting salary compression does little to excite either job candidates or incumbents, unless offset by other remuneration.

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