Tips for Creating a Strategic Comp Plan That Retains and Engages Employees 

Tips for Creating a Strategic Comp Plan That Retains and Engages Employees 

Building a strategic compensation plan is one way organizations can engage and retain their employees. It’s a step-by-step process that requires you to first identify your top performers and assess your strategy. Once you’ve taken those to steps, you can then begin to hash out a plan that aligns with your budget and achieves the maximum possible return on employment.

Here’s how:

Allocate Compensation Budgets

The common challenge for line and compensation managers is working around a fixed compensation budget and allocating money to where it gives the maximum return on employment. A pay-for-performance model provides a valuable tool for achieving this goal.

Perhaps you have considered this strategy in the past, but felt it was too time-consuming or resource-intensive. It doesn’t have to be.  A simple approach can yield great results.  Below are a few ideas to help you get started.

Categorize Employee Performance – For most organizations, employee performance falls into one of two categories.  For a more consistent and fair measurement of performance, use these (or others more appropriate for your organization) to create a systematic way of identifying what part of the employee population belongs.

  1. Qualitative Performance – activities directly related to customer experience.  Most of your sales and support personnel would fall in this category.


  1. Quantitative Performance – activities related to the administration side of the organization such accounting, processing, inventory, etc.


Create A Pay-for-Performance Checklist – Below is a checklist you can use for building a basic pay-for-performance plan:

  • Clearly outlined performance category segmentation
  • Clearly defined job descriptions and goals
  • Clearly defined department and organizational goals (aligned with the employee goals)
  • Performance management system for tracking manager feedback/evaluations
  • Transparent goal tracking system for employees (view current results vs. goals)


Model Your Compensation Plan – Once a pay-for-performance plan is in place, you can utilize any number of powerful compensation components to reward your employees including:

  • Base compensation
  • Merit Pay
  • Equity
  • Special Recognition
  • Paid Time Off (PTO)
  • Opportunity Income (tuition, paid development)


Clearly, there’s a lot to consider when designing an effective compensation plan, especially when you have specific goals like retention and engagement in mind. With the help of software solutions such as COMPview by HRsoft, you can utilize planning tools, powerful reporting, and automation features that optimize compensation planning and make the entire process much smoother and simpler. To learn more, visit the COMPview product page here.


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