February 15, 2024

Designing a Compensation Plan – What You Need to Know

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Decisions about employee pay can have an incredible impact on a company’s ability to grow.  When compensation plans are managed carefully, it aligns people’s behavior with the company’s strategy and generates better performance.  When managed inappropriately, the opposite occurs: loss of key talent, demotivation, and poor financial results.  A carefully managed compensation plan has answered the following questions:

  1. What does a company want to achieve?
  2. What steps are needed to achieve these strategic goals?
  3. How does a company clearly communicate these goals, the steps to achieve these goals, and the employees’ incentives when the steps and ultimate goal is achieved?

To promote long-term success, business owners should carefully consider which strategies will yield the most effective results.  Irrespective of entity type, entity size, or specific industry circumstances, determining how to stimulate high performance in key employees is one of the more direct and beneficial tactics for business owners.  This concept of increased employee productivity seems intuitive. However, implementing a successful compensation plan is rarely ever simple.  There may be several approaches to fostering high performance in the workplace, but some form of compensation plan with clear milestones and incentives is a proven motivational force for a company’s growth and strong option for those struggling with retention.

An incentive compensation plan is an investment in human capital, which is a primary driver in a company’s growth and financial performance.  In the below illustrations, we provide a few alternatives to consider when developing your company’s incentive compensation plan.  These plans can be structured in various ways, accomplish many things, and provide benefits to both the employee and the company.  Sustaining and growing a successful business is no easy task.  Owners who prioritize employee commitment, collaboration, and loyalty will have a leg up on their competition.  Elliott Davis is here to help assess your situation and tailor a plan that fits your needs. Contact us to get started.

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The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice

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