Compensation Planner and Worksheet

This worksheet will help you develop effective pay plans for your team members.

For fixed-compensation positions:

· What is the right hourly rate for the business and the team member?

o How does this rate compare to what you’re paying your similar current team members?

o What are other companies paying similar positions?

§ Is your position more desirable so you don’t have to “outbid” other employers?

§ Is your position less desirable so you need to offer more to get good applicants?

§ Do you have more or less benefits than comparable employers?

o When you advertise for this position at this rate, do you get a lot of good applicants?

o Do you have a lot of turnover in this position? (If so, your compensation might be low).

o Even if people might work for less, is it an honorable living wage in your area?

· Should you pay by the hour, or by the unit of work produced?

o If by the hour, might you get a lift in productivity with some kind of bonus?

· Do you have some method for increasing the rate over time for inflation and experience?

· If you’re giving someone a raise, did you take the time to pile on some sincere praise too?

For performance-based pay plans:

· Have you considered the relevant questions in the fixed-compensation section above?

· If you’re making a change to a pay plan, have you given the team member plenty of notice?

· Should you have a guaranteed salary portion to help smooth out any dips?

· Are the bonuses paid in ways that reward the behavior you’re trying to increase?

o Are bonuses paid frequently so team members enjoy rewards often?

o Do you have long term goals that should be rewarded at longer intervals (e.g. annually)?

o Have you associated the rewards with your desired objectives?

o Are bonuses entirely paid on numerical goals or is there a subjective component?

o Should the person be paid individually or on the results of their team?

· Is there a way to include the team member’s input on the design of the plan?

· Are the bonuses all monetary or do they involve other perks such as extra vacation time?

· If the team member doesn’t perform well, is it desirable to you that they quit?

· Did you do enough due diligence on the plan?

o Is it written down in an intelligible way?

o Have you run the plan against actual prior months or years?

o What is your total compensation target? Will this plan reasonably achieve it?

o What will you do if the plan pays more than the person actually earns?

o Will you be comfortable paying out large sums if the performance is very high?

o Will the plan cause unacceptably large swings in income, high or low?

o If market conditions improve or decline, will the team member get too much or little?

o Did you include a disclaimer that you will review and change if necessary at an interval?

o Did you run the general format (not necessarily every plan) by an attorney?

o Would you find this pay plan motivating and reasonable if it were your pay plan?

· Before implementing the plan, did you review it with the team member and obtain a signature?

o Does the team member understand that it may be changed from time to time?