A pay philosophy is a company's commitment to how it values employees. A consistent pay philosophy gives the company and the employee a frame of reference when discussing salary in a negotiation.
The goal of a pay philosophy is to attract, retain, and motivate employees. For companies in the private sector, this usually requires a competitive pay philosophy. For companies in the public sector, this means a well-rounded philosophy, with a focus on benefits and work life.
Companies attract, motivate, and retain through total compensation
The purpose of a good compensation philosophy is to attract, retain, and motivate good people. To accomplish these goals, companies use a mixture of the three main components of compensation: Base pay, also called salary; incentive pay, whether in the form of cash or non-cash award such as stock; and benefits, or non-financial rewards. A pay philosophy is a blend of all three, since the company must pay for whatever it delivers to employees.
For more information on the importance of pay philosophies, view this article by Salary for Business.
Through the Michigan Chamber’s partnership with WageAccess, you can gain access to valuable Compensation, Benefits, Pay Practices and Incentive Pay information and trends in the State of Michigan, and across the United States. Learn more about discounts offered to Chamber members.