Factors Influencing compensation Strategies

Design compensation strategies involves determination of the hierarchy of grades, formulating a compensation structure, and finalizing the pay packages with the aim to attract and retain talented workforce. 

The external and internal factors that affect a compensation strategy are:

1. Individual factors 
2. Organisational factors 
3. Competitive factors 
4. Product cost factors  

Let's discuss each one in detail:

1. Individual factors - Organisations while designing compensation strategy consider employees concern about compensation worth. In designing the compensation strategy individual skill, knowledge, expertise, attitude, sex, work environment and experience play an important role in fixing the level of the job.

2. Organisational factors - Organisational learning depends on productivity of employees and their efficiency which marks the designing of compensation strategy. This measures the company's  ability to pay.

3. Competitive factors - The compensation strategy also depends on the mission and vision of the organisation. That means whether the organization is willing to lead, develop competitiveness or meet the changing environments.

4. Product cost factors - It is a process of converting the job price into a monetary award to the employee performing employee performing or going to perform that job.