Understanding Strategic Compensation

Understanding strategic compensation


Employee compensation is a strategic issue for any organization. A compensation plan not only is an indicator of pay packets and reward programs but also an instrument of attracting the best human resources available in the market. The type of manpower to be recruited, and the amount of money to be utilized for retaining them forms the crux of a company’s strategic compensation plan.

Compensation Strategy – Definition and Purpose

A compensation strategy is not merely forming remuneration principles and pay scales of employees of an organization, but defining key strategic behavioral patterns that could also be remunerated. Through a compensation strategy differentiation is made between strategized remuneration and non-strategized usual remuneration.

The principal purpose of strategic compensation is to drive performance and make members of an organization innovative in their approach and attitude towards work. This sets to explore: i) rewards for performance; ii) perks and benefits; iii) employee retention; and iv) attracting the best human resource available.

Rewarding performance

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