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Dear Workforce How To Prepare A Salary Pay Structure

Heed two forces: corporate governance and competitive pay.
April 8, 2001
Related Topics: Compensation Design and Communication, Dear Workforce, Compensation
QDear Workforce:

    Could you shedsome light on how to prepare a salary pay structure for a company? What are allthe criteria one should consider when designing such a structure?

- G.R.Venkatakrishnan

Dear G.R.:

    When designing thecompensation structure for your company, it is important to recognize that onesize does not fit all. You need to create a tailored structure that specificallysuits your company and fits within the larger whole of your industry.

    Based on my morethan 20 years' experience in advising HR professionals and business leaders onhow to structure effective executive compensation packages, I believe that thereare two forces that should drive the compensation practices in every company:good corporate governance and competitive pay. .

    I recommend thefollowing tips to help you to create a competitive executive compensationstructure:

  • Know what the competition is doingand benchmark your structure to reflect competitive practices for retentionand recruitment purposes.

  • Salaries should reflect level ofresponsibility executive may have at corporation or division level. Beconsistent when structuring peer packages.

  • Try to avoid negative criticism ofshareholders, boards of directors, shareholder activist groups andinvestment-management firms by structuring salaries that conform to 162(m)deductibility)

  • Create a structure where salariesand any increases reflect company performance as espoused by the boardcompensation committee. State compensation philosophies each year in annualreport to shareholders.

  • Maintain a sense of teamwork andegalitarian pay at the top by structuring a CEO salary that is notsignificantly higher than the other four top executives

  • Consider salary increases to topexecutives in the form of stock options or restricted shares (especiallyamounts exceeding the $1 million amount established under set by 162(m) ofthe IRC).

    Compensation canplay a strategic role in addressing critical business challenges, such asattracting and retaining top talent, and using incentives to achieve yourbusiness strategy. It is important to get it right. Do your homework and makesure you outpace the competition.

SOURCE: Judy Fischer, managingdirector, Executive Compensation Advisory Services, DrakeBeam Morin, Feb. 13, 2001.

The information contained within this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or legal opinion. Also, remember that state law may differ from federal law.


 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

If you have any questions or concerns about, please email or call 312-676-9900.

The Workforce fax number is 312-676-9901.

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