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How to Create an Employee Compensation Plan that Attract Candidates

Whether you’re looking for your next employee or want to increase workplace satisfaction for existing team members, make sure that you have an excellent employee compensation plan. People want to earn a good living wage and enjoy exclusive benefits while they work for you. Read on to learn about standard options and to take a look at an example of a compensation plan.


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Components of a compensation plan

Salary is typically top of mind for candidates when applying for jobs. While salary is a major selling point to any position, there are job perks that also entice high-level candidates. Take a look at the standards you need to meet or exceed when creating your compensation plan example or proposal.


Salary and wages

Nonexempt employees receive an hourly wage based on their hours worked and overtime pay for when they work over 40 hours in a workweek. Overtime pay is generally calculated as one-and-a-half times the usual rate of pay but may be offered at a higher rate at the employer’s discretion.


Special employee situations

Exempt employees, such as those in executive positions or professionals who require higher education, aren’t usually paid extra for overtime worked.


Salaried workers, while often nonexempt, are paid based on a set annual amount instead of an hourly wage. As long as an employee is being paid more than the minimum wage would pay when working 40 hours a week, they can generally qualify for exempt status.


Unions can impose their own regulations regarding wages, which you should pay attention to if you work with union employees. Labor unions can instate wage contracts based on a collective bargaining agreement that requires employers to pay each professional level a certain minimal amount. Unions can also require employers to provide certain benefits, such as health and life insurance.


How to determine salary and wages

Perform market research to see what the average pay scale is for the positions you’re looking to fill. Then, figure out the best salary to offer. Keep in mind that offering competitive pay and high-value benefits packages are excellent strategies for finding quality applicants and maintaining employee satisfaction.



There are various types of bonuses you can offer new employees. A referral bonus can be paid to an employee and the person who introduced them to the position. Sign-on bonuses are also common, especially in professional industries like transportation and education. Here are some other bonuses you can consider offering:


  • Spot bonuses are awarded on the spot for extraordinary service.
  • Annual bonuses are given based on meeting certain metrics, such as sales, and are often awarded at the end of the year.
  • Retention bonuses are offered to employees who stay with the company through a difficult period.
  • Performance bonuses are usually given after positive performance reviews.
  • Longevity bonuses are for employees with the most amount of time within the company to thank them for their loyalty and dedication.
  • Holiday bonuses, usually given at the end of the year, are a way to thank employees during the gift-giving season.

Benefits and perks

Depending on your industry and company, you can offer a multitude of unique and interesting benefits. Service and retail companies often offer employee discounts, for example. Other benefits can include workspaces designated for recreation, like an on-site dog park or gaming room. There are many benefits that tend to be standard, such as:


  • Paid time off with accumulating vacation days
  • Paid family leave, including paternity and adoption leave
  • Transportation benefits, such as discounted public transportation passes and assigned parking for those with vehicles
  • Tuition reimbursement and scholarship opportunities
  • High-yield savings plans
  • Employee-support services, including discounts at local merchants, childcare and mental health counseling when needed
  • Memberships to gyms and industry-related organizations
  • Professional development stipends for activities like workshops and courses

Template and example of an employee compensation plan

[Company name]
To: [Applicant name]


[Company name] employee compensation plan

The basic compensation for the position of [job title] will be $[amount] per hour.


These wages will be paid [state pay days] with respect to national holidays that could lead to bank closures. Overtime will be paid at $[overtime wage] per hour for employees who work over 40 hours in a week or eight hours in a day.


Other than the basic compensation, employees will also be paid a travel assistance allowance of $[amount] per month, and a rental assistance allowance of $[amount] per month where applicable.


Eligible employees may qualify for certain other benefits or bonuses:


  • A sign-on bonus of $[amount] is to be paid after [x] days of employment.
  • Sales commission, paid quarterly, of [amount]% of sales secured
  • Unsociable hours bonus of $[amount] per shift worked
  • [If company stock options are available] Employees are eligible to participate in our company stock option program.

Vacation/Holiday/Leave compensation:

Workers will be offered 2 days’ holidays every month as part of casual leave which is paid. Leave must be approved in advance by the worker’s department Head. In addition to casual leave, workers are offered a paid vacation period of 5 days in a year. This leave must also be approved by the relevant Head of department.


Health Insurance:

Workers will be entitled to enroll in the comprehensive health plan operated by [company]. This benefit will be equitably offered to all the employees. Enrolling in this health insurance plan will be compulsory for all workers and 50% of the payment to the premiums will be made by the employer and the rest will be deducted from worker’s compensation on a monthly basis.


Employee compensation plan FAQs

Can an employee negotiate their compensation plan?

Most companies allow for some negotiation in the wage and salary aspect of a compensation plan. Depending on your company’s structure and policy, there may be room to negotiate benefits, such as assigned parking spaces or specific vacation periods. An employee might also want to negotiate their stock and retirement options.


Are there any federal requirements for a compensation plan?

Depending on the size of your company, there may not be any mandatory health insurance or other requirements aside from adhering to federal and local minimum wage and overtime policies. Larger companies may be required to provide a health insurance option to employees as well as family and medical leave although they don’t always need to be employer-funded.


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