Intro

Compensation is never straightforward. Implementing a structured approach to pay can feel overwhelming, but I hope this guide provides you with a clear path and the necessary decisions for designing a compensation system centred on fairness, consistency, and transparency. When built this way, it saves everyone time, allowing them to focus on building a successful business rather than questioning pay disparities.

To ensure a successful rollout of your salary bands and compensation philosophy, you should continually focus on:

1. Consistency

• Consistency is paramount. Maintain a uniform approach when deciding on salaries for new hires, promotions, and location-based pay. It’s pointless to have different rules for different people.
• Consistency fosters trust, fairness, and equity. Deviation from the rules can quickly undermine these values. Small exceptions accumulate and can unravel the entire system: a recruiter offers a mismatched title, a manager approves an out-of-band salary, or a counteroffer is made to retain a valuable employee.
• Always apply and adhere to the rules. Ensure you have a clear and justifiable rationale for any compensation differences that you can confidently explain. If you find yourself thinking, “Oh no, Person A will find out they’re earning less than Person B,” something has gone wrong.

2. Objectivity

• Personal circumstances often arise during salary discussions, but remember, all employees have personal circumstances. Stay objective when deciding whether to consider any personal factors in salary decisions.

3. Context

• Always consider the business context when making salary decisions. Occasionally, you might need to exceed your salary ranges to secure a crucial hire. Weigh the overall context to determine if an exception is warranted.
• Frequent salary exceptions may indicate that:
  • Your compensation ranges need updating (i.e., they’re below market value).
  • Certain managers find it difficult to say ‘no’ to specific requests, despite a no-negotiation policy on salaries.

4. Re-evaluate Your Approach to Compensation

• Review your compensation philosophy during significant business changes to ensure it still supports your objectives. These changes can include:
  • Transitions to hybrid or remote work
  • Changes in organisational design and roles
  • Mergers and acquisitions
  • Shifts in executive leadership
  • Opening your first office outside of your home country
  • Changes in the labour market
• Regularly audit your compensation practices to ensure they remain competitive and aligned with your company’s growth. Conduct salary surveys, review market trends, and assess internal data.