Guide to Compensation Analysis: definition, template, steps to do
What is compensation analysis?
Compensation analysis is the systematic evaluation and comparison of a company's total compensation package, including salaries, bonuses, benefits, and perks, comparing it with internal structures and external market rates. This process ensures the company offers competitive rewards to attract and retain talent, stays compliant with labor laws, and makes informed financial decisions about employee pay.
Why is compensation analysis important?
As mentioned, comp analysis is important for organizations as it ensures competitive pay to attract talent, maintains internal equity, and provides insights into market trends. This analysis helps companies achieve their business goals by ensuring they have the right talent in place.
Steps to do a compensation analysis
Conducting a comp analysis is important to ensuring fair and competitive pay for your employees. Here are the key steps involved:
Gather data: Gather salary, bonus, and benefit data from your company and competitors. Internally, review employee records and payroll. Externally, use salary surveys and industry reports. Ensure the data is relevant and comparable.
Analyze the data: After gathering data, compare internal compensation to market rates. This helps ensure fair pay and identify any adjustments needed.
Develop a plan: Decide on a compensation strategy based on your comp analysis. Adjust salaries or benefits if below market rate to attract and retain talent, and justify pay increases for high performers.
Use Compensation software to get the latest market data. The tool's easy market pricing process helps you quickly and accurately match and price your company's jobs. You can also match your organization's job titles and descriptions with ease.
Comp analysis template
A competitive analysis template can be customized to your needs. Use this general framework as a starting point:
Employee information
Employee ID: Unique identifier for the employee
Name: Full name of the employee
Position: Current job title of the employee
Department: Department in which the employee works
Date of Hire: The date when the employee started working at the company
Job description
Job responsibilities: A detailed list of tasks and responsibilities associated with the employee's position
Required skills and experience: The skills and experience required for the employee's position
Compensation details
Base salary: The fixed amount of money that an employee receives as compensation for work performed
Bonus: Extra compensation provided to an employee beyond their regular wage
Equity: Stock options or any other form of equity compensation
Benefits: Non-wage benefits given to employees on top of their regular pay
Total compensation: The sum of base salary, bonus, equity, and benefits
Benchmarking information
Industry average salary for position: The average salary for the same position in the industry
Difference from industry average: The difference between the employee's salary and the industry average
Performance information
Last performance review score: The score or rating the employee received in their last performance review
Performance review date: The date when the last performance review was conducted
Compensation history
Date of last raise: The date when the employee last received a raise
Percentage increase: The percentage increase in salary from the last raise
Reason for last raise: The reason why the employee was given the last raise (e.g., promotion, performance)
Market comparison
Market pay data: Information about what similar jobs in the market are paid
Position within pay range: Where the employee's pay falls within the market pay range
Recommendations
Proposed adjustments: Any proposed changes to the employee's compensation
Reason for adjustment: The reason for the proposed adjustment
Expected outcome of adjustment: The expected impact of the adjustment on the employee's performance and retention
Approval
Prepared by: The name of the person who prepared the compensation analysis
Reviewed by: The name of the person who reviewed the comp analysis
Approved by: The name of the person who approved the compensation analysis
FAQs
Here are some common questions about comp analysis:
Who is responsible for conducting compensation analysis?
Compensation analysis is typically managed by HR, often with a Compensation Analyst. They research salary data, market trends, and competitor benefits to create a fair compensation plan.
Your HR will find conducting comp analysis easier with Compensation Software. The tool provides up-to-date and accurate reported pay data, offering prices for every job in every pay market, even those not found in traditional surveys. It covers 15,000 job titles, 225 industries, and 42,000 geographies.
How often should compensation analysis be conducted?
A formal comp analysis with external market data is usually suggested every two to three years. HR might also do a lighter "pulse check" annually to keep salary ranges competitive and adjust as needed based on trends or internal factors.
Compensation Software's Survey Management feature helps organizations efficiently manage their compensation analysis process. It streamlines data collection and analysis by searching for relevant data in your survey library and pulling in survey data sources into your market pricing composites.
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