To successfully attract, retain, and motivate your employees, your organization should implement a formal compensation program. Similarly, your compensation program should potentially address important related issues such as external equity (do you want to be below, at, or above your defined labor market with respect to base pay) and internal equity (do you want to perform internal comparison among your organization’s jobs).
A formal compensation program encourages improved job performance and motivates employees to develop their potential abilities. A flexible pay administration program reflects changing economic and competitive conditions and allows for change. It also follows the principles of equal employment opportunity, basing differences in pay on qualifications, position responsibilities, and individual performance without regard to attributes not related to the position, such as race, color, religion, sex, age, national origin, marital status, or any disability that does not preclude the effective performance of position accountabilities.
