How to Implement Broad Based Compensation in Your Company

Implementing a broad-based compensation strategy is a powerful tool for driving company success. Matching pay equity with a well-designed salary structure can motivate employees, retain top talent, and increase job satisfaction.

With Salary.com's Data as a Service API and its leading HR compensation data, you can now implement broad-based compensation in your company and streamline transparent, fair, and competitive compensation decisions that help you stand out in the current market.

What is broad-based compensation?

Broad-based compensation is a strategy that applies to all job levels and ensures that every employee, from entry-level to management, is compensated. It expands the definition of pay to include wages, employee benefits, performance-based incentives, and long-term rewards.

Companies, whether public, private, or nonprofit, can benefit from collective compensation plans, especially during major changes like acquisitions or restructuring. These plans provide the flexibility to create fair and competitive pay programs that support the company's growth and success.

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Variable compensation vs broad based compensation

Variable compensation ties pay to individual performance, such as offering bonuses to sales reps who exceed their sales targets. This motivates high performance by matching rewards with specific achievements.

On the other hand, broad-based compensation ensures a consistent pay structure for nearly all employees, regardless of their role or performance level. This promotes equity and teamwork, as all employees feel valued and supported if they contribute to the company.

Why use broad-based compensation?

A broad-based compensation plan ensures that all employees are fairly compensated based on their contributions, regardless of gender, age, or race. With 51% of employees believing bias impacts pay decisions, adopting collective compensation is essential to promote pay equity and strengthen the company’s ability to retain talent and drive success.

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Benefits of implementing broad-based compensation

Organizations that implement a comprehensive compensation plan can expect the following benefits:

• Enhances employee appreciation by aligning compensation with the company's success and employee contributions.

• Supports a competitive edge by creating a compensation plan that attracts and retains top talent.

• Boosts employee performance through clear salary ranges and long-term incentives.

• Aligns with business goals by integrating compensation strategy with organizational objectives.

• Encourages career development by offering rewards programs and opportunities for growth based on merit.

• Promotes equity by providing guidance on fair pay practices across various forms of compensation regardless of employee personal background.

Broad-based compensation examples

Here are top examples of inclusive compensation:

1. Savings plan

   Deduct a set amount from employees' pay each month to invest in company equity at a discount from the market price. This aligns with the total rewards strategy by offering a combined value of savings and employee equity benefits.

2. Contribution plan

   Offer proportionate or matching contributions to employees’ savings or retirement accounts. This creates an incentive for employees to save for their future while also promoting a sense of financial security and loyalty to the company.

3. One-time plan

   Allow employees to invest a predetermined amount in company equity with a discount for a specified period. This enhances employee engagement by linking compensation directly to their investment.

Key considerations for implementing broad-based compensation

Here are key considerations you need to consider in implementing collective compensation:

Compensation philosophy

Establish a clear compensation philosophy that matches with the organization's goals and values.

Salary structure

Create a salary structure that defines consistent pay ranges for each job code and position.

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Pay transparency

Implement pay transparency to build trust and fairness within the team.

Non-exempt employees

Ensure non-exempt employees receive fair compensation for overtime and other forms of pay.

Employee performance

Link compensation structures to employee performance to drive results and motivation.

Variable pay

Incorporate variable pay in alignment with business success to reward deserving employees.

Total rewards strategy

Develop a competitive strategy that combines base salary, benefits, and variable pay.

How to implement broad-based compensation

Follow these 7 simple steps on how to implement a broad-based compensation:

1. Step 1: Define your compensation philosophy

   Identify the core principles guiding your compensation strategy like pay equity and business goals. Ensure that it addresses balancing base salary, variable pay, and long-term incentives to provide a clear basis for a fair and transparent compensation plan you are going to create.

2. Step 2: Gather employee and stakeholders' opinions

   Solicit input from employees and key stakeholders regarding the compensation plan and its components. This provides valuable information to ensure that all perspectives are considered before implementing the plan.

3. Step 3: Develop competitive salary structures

   Conduct a comprehensive market analysis to benchmark salaries against industry standards and identify competitive pay ranges for each job role within your organization. Establish clear salary grades and ranges based on factors such as experience, education, and performance. This ensures that your organization will maintain internal equity and external competitiveness within the industry.

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4. Step 4: Create a broad-based compensation plan

   Design a plan that includes base salary, variable pay, and benefits for nearly all employees, including non-exempt and exempt staff. This improves employee engagement, retains talent, and promotes inclusiveness by recognizing the diverse contributions of team members regardless of their personal backgrounds.

   For instance, let's consider that you chose a matching contribution plan to support an employee's retirement savings.

   The formula is: Employer's Contribution = Monthly salary × Contribution percentage × Employer's matching rate.

   If an employee has a base annual salary of $50,000 ($4,166.67 monthly) and contributes 6% of their salary ($250) to their retirement account, and the employer offers a 50% match, the employer's contribution is calculated as:

   Employer's Contribution = $4,166.67 × 0.06 × 0.50 = $125

   In this case, the employer would contribute $125 to the employee's retirement account for the month.

5. Step 5: Ensure legal compliance

   Ensure that your compensation practices are in accordance with all applicable laws and regulations. Keep updated on changes and improvements in employment laws and tax rules. Work with legal experts to ensure your plan is legally sound and protects the company from potential risks.

6. Step 6: Implement pay transparency

   Communicate your compensation structures openly with employees. Provide guidance on how pay decisions are made and align with the company's compensation strategy. This promotes trust within the organization and enhances employee appreciation for the company.

7. Step 7: Regularly review and adjust the plan

   Monitor the effectiveness of your compensation plan by assessing its impact on employee satisfaction and business outcomes. Make adjustments as needed to address any issues and discrepancies related to pay equity or changing market conditions. This ensures that your compensation strategy remains relevant and supports organizational goals for the long run.

Implementing a comprehensive compensation strategy is essential for helping your organization attract and retain top talent in the competitive job market. With Salary.com's Data as a Service API, you can access real-time salary data, compensation benchmarks, and market insights that empower your HR team to build a competitive broad-based compensation structure.