The Major Elements Of An Effective Strategic Compensation System

                    Compensation Strategy Name Institutional Affiliation                         Compensation Strategy Compensation philosophy refers to a formal statement presenting an organization’s position on workers’ compensation. It provides a detailed explanation of the payment structure and creates a framework that maintains consistency. The key components of compensation philosophy are the financial position and the organization’s size, its objectives, the difficulty of identifying skilled labor force and the salary survey information (SHRM, 2015). The key purpose of a compensation philosophy is to attract and motivate skilled employees, as well as ensure high employee retention. Limitations arise from the objective of creating an efficient program that does not exhaust the company’s resources. Examples include the periodic adjustments, constant communication with employees and the dynamic nature of the business environment. An effective strategic compensation system is used as a tool for motivating an organization’s workforce, as well as attracting skilled employees (Kigo & Gachunga, 2016). The key elements are regular evaluation of the system, accuracy, effective communication, clear goals and objectives, and Legal compliance. Accuracy focuses on ensuring that the process of determining the employees’ salaries is done based on the company’s data and the industry trends. Effective communication plays a key role in motivating the workforce. Goals and objectives ensure that the compensation system aligns with the companies set goals, while legal compliance ensures that the company follows the regulations of the industry while formulating the strategy. Goals and objectives help an organization achieve success both in the short and long term. Successful companies base their operations on a plan which is derived from goals and objectives. High competition in the industry has made it tough to retain top talents in an organization (Kigo & Gachunga, 2016). When an organization identifies the right pay, achieves consistency and is able t...