A compensation philosophy is a short (one page or less) written document that outlines what your compensation program intends to accomplish and how, according to CUNA's 2016-2017 Guide to Setting Salaries.
Your philosophy provides the framework for determining base salaries, pay ranges, and salary negotiations.
To measure the extent of your success, ask the following questions:
1. How long do employees typically stay at the credit union?
2. Where do employees go when they leave the credit union?
3. Why do employees leave the credit union?
4. How long have the credit union's best employees been with the credit union?
5. Do employees value the credit union's total compensation package – and its individual components?
6. At what level is employee morale?
7. Do employees understand the credit union's compensation philosophy?
8. Do employees perceive the credit union's compensation system as fair, both internally and externally?
9. Does the credit union align pay ranges with the credit union's compensation strategy?
10. Does the credit union reward employees for taking on new tasks?
11. Does the credit union give employees training and development opportunities?
12. Does the credit union promote from within or hire from the outside for skilled positions?
13. Does the credit union receive applications from skilled applicants when a position is open?
14. Are wage increases within the credit union's budget?
Answer these questions by studying retention, turnover, recruiting, and hiring trends; conducting exit interviews; and studying promotion and training policies and activity.
You also can gather valuable information by talking to managers and conducting employee surveys.
Continually monitor and assess your compensation strategy to ensure it remains effective.
You'll likely need to tweak your compensation philosophy due to outside factors that have an impact on how you compensate employees.
Changes in the labor market—skill shortages, unemployment fluctuations, competitor practices, etc.—and macroeconomic forces can precipitate modifications to your compensation plan.
In addition, you might need to make modifications due to budgetary and staffing changes at your credit union.