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A compensation philosophy guides your organization in creating fair, transparent compensation programs and helps you attract and retain employees. Learn about the different types of compensation philosophies, components of a compensation philosophy, how to create your own, and how to measure its effectiveness. ContentsWhat is a compensation philosophy?Why does your organization need a compensation philosophy?What are the different types of compensation philosophies?Components of a compensation philosophyHow to create a compensation philosophy What is a compensation philosophy? A compensation philosophy, or pay philosophy, is a document providing direction, guidance, and clarity for making compensation choices within an organization. In other words, it is the foundation of your approach to employee compensation based on your organization’s vision, mission, values, and strategic objectives. The culture of the organization, size of the organization, and its resources influence the compensation philosophy. Board of directors, executive leadership, Human Resources, and Compensation & Benefits subject matter experts (the Comp Team) are usually involved in developing the compensation philosophy and designing the compensation structure. A documented compensation philosophy is typically one to several pages long. Why does your organization need a compensation philosophy? A compensation philosophy guides designing compensation structures, managing compensation & benefits programs, determining compensation packages
