| January 30, 2017


There are three main goals for an effective compensation system which includes pay and benefits:

1. Compensation packages need to be equitable in terms of:

a. External equity–Is your pay/benefits perceived to be fair relative to what other companies offer their employees?

b. Internal equity–How is pay distributed among different jobs within your company?

c.Individual equity–How are employees working the same job paid relative to one another?

2. Compensation packages need to be efficient. Are you getting in production what you are paying for?

3. Compensation packages need to be Legal. LIke most HR areas, there a many laws dealing with compensation such as FLSA, FMLA, COBRA, ERISA, Equal Pay Act, etc.

For this discussion consider this: People will work to achieve equity! Remember this statement because you will need to manage such perceptions of your employees. What I want you to think about is what does this statement mean? How will an employee achieve equity in their compensation if they perceive they are being underpaid for what they contribute to the company?

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