Find an ASX listed Australian company of your choice. Listed Australian companies can be found on the website www.asx.com.au. You are required to download your chosen company’s latest annual report…..
Describe what is meant by a compensation philosophy, and what the philosophy should entail.
Describe what is meant by a compensation philosophy, and what the philosophy should entail. Emphasize why a compensation philosophy is important in the development and management of an organization’s compensation program. Please support your response through research and example.
GreggU. (2016b, September 26).What is a Compensation Philosophy [Video]. YouTube. https://www.youtube.com/watch?v=nfOK2jRfdSk
Craft a Compensation Philosophy Lay the groundwork for compensation that is competitive, cost-effective, and brand-aligned. 1Executive Summary A well-designed compensation philosophy is the foundation of an effective compensation strategy. • Employee compensation often comprises in excess of 70% of an organization’s ongoing operating expenditure, yet few organizations have plans in place to properly direct and control this expenditure. • The first step in compensation planning is the development of a compensation philosophy that clearly articulates the organization’s high-level approach to pay for each of its employee segments, including its target competitive position. A compensation philosophy should be primarily driven by business strategy and objectives. • A compensation philosophy should include: compensation objectives, current structure, basis of job value, focus of variable compensation, approach to raises and promotions, competitive intent for each employee segment, and approach to administration. • These building blocks will help you to create employee segment plans that are legal, culturally-aligned, and designed to support organizational goals. Saying you have “competitive compensation” isn’t enough – articulate your competitive position. • “Competitive compensation” is a vague term that is generally used to indicate that an organization pays at or around the midpoint of the market (P 50) for base pay, total cash compensation ( b ase + variable pay), or both. • A compensation philosophy needs to be specific in order to effectively direct compensation practices; it needs to specify the target approach (l ag, match, lead) and the target market position it desires for each employee segment. o Note: The approach and/or the specific percentile target may be invisible to employees. It depends on the desired degree of pay transparency. 2Understand the Total Rewards model before beginning the compensation design process