How to Create a Compensation Plan:
1. Start from scratch.
Think about how many employees your business will need and what positions are essential to your business operations. Write all of these job titles down.
2. Create a job description for each position.
You should have full job descriptions for every position in your company. You can get ideas for job descriptions by researching your competitors, or you can use one of our job description templates.
3. Determine the appropriate amount of compensation.
While you are researching your competitors, pay attention to how much compensation they are offering for the various positions you need to fill and what special incentives are common. This will give you an idea of what you need to offer to attract the best talent. Be sure to look into OTE or on-target earnings.
4. Factor in overtime.
Maybe some of your employees will have to work overtime, or maybe they won't. If they do, add this into your compensation budget, because overtime costs more and could affect your bottom line.
5. Identify the benefits and incentives that you will provide.
Popular benefits include things like basic health insurance, vision care, and dental care. Some employers also offer things like gym memberships, technology stipends, and so forth. Figure out what benefits you can afford. You may want to look into voluntary benefits as an affordable option.
As far as incentives go, think about what incentives will motivate your workforce and fit into your budget. It is common for sales compensation plans to have incentives for meeting sales targets, such as bonus payments or increased commission payment rates.
6. Detail your decisions in a document.
After you have determined the compensation for each position, how much it will increase, what incentives and benefits you will offer, etc., you can put all of these details down in one document. By having all of this information in one document, you can share your compensation plan with your employees when they are hired.