Bus 409

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Strategic Compensation

(BUS 409)

Setting the Stage for Strategic Compensation and Bases for Pay

(Assignment 1)


Stephen Jones

May 1, 2011

Strayer University


Compensation is one of the most major relationships between the employer and its employee. Compensation shows the commitment from the employer to the employee and is a formal way for companies to attract, retain, and reward employees. An organization compensation plan should be well thought out, planned, organized, and evaluated in order to achieve the most effective results. However, there are three main goals for the compensation department. The three main goals consist of internal consistency, market competitiveness, and recognition of individual contributions.

An internally consistent compensation system determines the value of worthiness of each job within the organization. The internal consistency system is built on levels of hierarchy. The principle for building such system is that employees with more complex, highly qualified, and have more responsibility are paid higher wages of those who are less qualified, less responsibilities, and with little responsibilities. Internal consistency is accomplished by two factors job evaluation and job analysis.

One of the most significant ways for companies to attract and retain the most qualified employees is through the market competitive pay system. The market competitive pay system is supported by two factors the results from compensation surveys and strategic analysis. However, there are two additional categories that falls in the factors integrating the internal job structure with external market pay rates and determining compensation policies. The purpose of the strategic analysis is to examine companies’ external market context and internal factors. The compensation surveys major attention is the results of competitors pay wage and salary practices.

Recognizing individual contributions is the last of the three goals...